What is a Mortgage?

A mortgage is a broader term used for a home loan. A home loan is necessary is the majority of people are not able to pay for the cost of a condo, townhome or a home upfront. Lenders, banks and credit unions are the main sources of mortgage loans in the United States. The cost of borrowing money to pay for a home is calculated by using an amortization schedule depending on the type of mortgage loan, the amount being borrowed and the interest rate.

The amount a person is able to borrow is dependent on a number of factors. The primary factors include a person's credit score and history, current financial situtation such as income and monthly expenses. The interest rates can range from prime to a few points above prime for bad credit borrowers.

Types of Mortgages

There are two types of mortgages, fixed-rate and adjustable rate. Within each of these types of mortgages, there are variations of mortgages that play a big part in calculating the monthly payment and when the loan is due. Options such as interest only loans, or the more commonly used principal and interest loan are such examples. Additionally, mortgages also have different lengths. The most common periods are 15 year and 30 year mortgage loans. There are also loans that can be stretched out to 40 years, but most lenders do not offer it.

Mortgage Company Requirements

With the recent housing crisis, mortgage companies often require some down payment before even considering loaning out any money. Additionally, mortgage companies have almost always required some sort of homeowners insurance, whether it be a condo insurance policy, simple homeowners insurance or ho6 insurance.

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