What is a mortgage?
A mortgage is a loan which is secured by real property. Most people use mortgages to purchase or refinance their home. As with other loans, you must apply for a mortgage and get approval. The amount you can borrow depends on several things, such as your income, your total debt and your monthly expenses.

Once your mortgage is closed, you receive the total amount of the loan at once, which is used to pay the seller (in a sale transaction) or pay off any existing loans on the property (in a refinance transaction.) You then repay the loan in monthly payments according to a predetermined schedule. Most mortgages today are for periods of 15, 20, or 30 years.

To determine the right type of mortgage for your needs, you should consider:

• How much cash you have available for the down payment and closing cost.


• Whether you think interest rates will rise or fall.


• How long you plan to stay in the home you are purchasing or refinancing.

Two key definitions to understand:

Closing Costs: There are several kinds of fees associated with a mortgage. Many lenders charge an origination fee and a processing fee. Other fees associated with loan closing include, but are not limited to, your attorney's fees, filing fees, mortgage taxes, title search and title insurance. You may also be asked to pay real estate taxes and/or establish escrow accounts for real estate taxes and home owner's insurance.

Annual Percentage Rate (APR): Annual percentage rate or APR is the actual cost you are paying for the mortgage loan. The APR reflects the cost of your mortgage loan as a yearly rate. It will generally be higher than the interest rate. All fees that are paid directly to your lender, the interest rate paid on the mortgage, and any mortgage insurance premiums are also considered when calculating APR.

Today there are a variety of mortgages to fit every home buyer's needs. The most common types are:

Fixed Rate Mortgages Balloon Mortgages

Adjustable Rate Mortgages Conventional Mortgages

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