Selecting a Mortgage
In This Chapter
Exploring the differences between fixed-rate and adjustable-rate mortgages
Understanding hybrid loans, balloon loans, and negative amortization
Selecting the loan that’s best for you
Looking at points, caps, and other mortgage mumbo jumbo
Finding a lender (or finding someone to find a lender for you)
Most of us need to take out a mortgage to buy a home for the simple reason that doing so is the only way we can afford a home that meets our needs. This chapter helps all nonwealthy folks comprehend mortgages and then choose one. (If you are wealthy and have a great deal of money to put into a property, this chapter can also help you decide how much of your loot to put into your home purchase.)
Start with the basics. What’s a mortgage? A mortgage is nothing more than a loan that you obtain to close the gap between the cash you have for a down payment and the purchase price of the home that you’re buying. Homes in your area may cost $70,000, $170,000, $470,000, or $770,000. No matter — most people don’t have that kind of spare cash in their piggy banks.
Mortgages require that you make monthly payments to repay your debt. The mortgage payments comprise interest, which is what the lender charges for use of the money you borrow, and principal, which is repayment of the original amount you borrow.
As noted in Chapter 3, the lender may also insist that you establish an impound account if your cash down payment is less than 20 percent of the ...