How to understand home loans and get the lowest mortgage rate you can

How to understand home loans and get the lowest mortgage rate you can

The thought of a mortgage can seem overwhelming, because it's one of the largest financial commitments you'll ever make, if not the biggest. But the concept itself is actually pretty simple. A mortgage is a loan from a bank or a financial institution that helps you purchase or refinance a home. If you want to live the American dream of being a homeowner, you're most likely going to need a mortgage. Mortgages are secured loans, meaning you need to put up an asset — in this case, the house — as collateral. You pay back a mortgage in monthly installments over an agreed-upon period of time, typically 30 or 15 years. A home loan is a major responsibility. So, before buying or refinancing a home, you need to understand several basics about mortgages: how they work, the types that are available, and what you can do to make sure you’ll get the best mortgage rate possible. fizkes / Shutterstock At closing, you sign a mortgage note, agreeing to pay back your loan. When you take out a mortgage, you agree to repay the loan, with interest, under the condition that if you don’t, your house could be taken away — foreclosed on, in real estate lingo. The many documents you sign at a mortgage closing include your mortgage note, which is a legal contract confirming your promise to pay back your loan, with interest, within the agreed-upon term. 1. Principal. The principal balance on your mortgage is the amount you still have left to ...
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