Choosing a Mortgage

Before you choose a house, you need to choose a mortgage. Lenders offer several different options for mortgage loans, so you should be able to find one tailored to your needs. To determine which type of mortgage is best for you, first learn the basics.

Fixed-rate Mortgages

With a fixed-rate mortgage, you lock in to an interest rate, which you pay for the duration of the loan (unless you refinance). Each of your monthly payments is the same, and each includes money toward both principle and interest. The payments follow an amortization schedule that typically pays more interest at the beginning of the payment period, and more principle as time goes on. You can choose between several mortgage durations, including 10, 15, 20, 30 and even 40 years.

Thirty-year fixed-rate mortgages are the most common because of the low monthly payment they afford. The longer your loan duration, the longer it’ll take to build equity and the more you’ll eventually pay in interest; however, your monthly payments will be lower, allowing you to afford a more expensive house.

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