Mortgage Basics You've Gotta Know
Know What a Mortgage Is
A mortgage is a loan that closes the gap between the cash you have for a down payment and the purchase price of the home you're buying. Each month, you'll pay a certain amount toward the interest on the loan and a certain amount toward the principal (the original amount borrowed). At first, you'll pay mostly interest, but as your principal shrinks, you'll pay more principal each month. Check out our Mortgage Glossary to for more mortgage definitions.
Differentiate Between Fixed and Adjustable Rates
Fixed rate mortgages have interest rates that stay the same throughout the loan's life (usually 15 to 30 years). Adjustable rate mortgages (ARMs) have interest rates that fluctuate. Sometimes the rate varies every 6 to 12 months, and sometimes it varies every month. Usually, your ARM's interest rate will be tied to an economic index. When rates are high, your rate will be high. When they're low, yours will be low. If you're buying a home when interest rates are "historically low," try to get a fixed rate mortgage.
Get Cozy With a Mortgage Broker
If you find a mortgage package that sounds reasonable (someone who manages the bids from banks on your deal), talk to a broker before signing, because they may be able to find a better deal. You usually don't pay brokers -- the bank does -- and they're a good resource for first-time buyers. Here are some tips on finding the right mortgage broker .
Work Those Tax Breaks
If you buy a new or existing home up to November 30th of this year, you could get a first-time home-buyer credit of up to $8,000. You can claim this credit on your 2009 federal tax return. To qualify, the house must be your main home and you must not have owned another main home during the last three years. Unlike prior tax credits, you don't have to repay this one if you stay in your home for three years.
Now that you have your mortgage figured out, it's time to revamp your home. Take a peek at other Nestie homes for inspiration!