an adjustable-rate mortgage will be modified month to month because the interest rate will shift after a certain period has passed
(PRWEB) March 23, 2015
When house hunters are first-time home buyers, The Federal Savings Bank knows that they will likely have to research all the ins and outs of mortgages to get the best deal. Since not all mortgages are the same, home buyers will have to account for various factors that should make their monthly payments more affordable.
Here are three things first-time home buyers should know about mortgages:
1. Difference between types of mortgage
There are two types of mortgages home buyers will encounter: fixed-rate or adjustable-rate mortgages. A fixed-rate mortgage means the payments each month will not change because the interest rate will stay the same. On the other hand, an adjustable-rate mortgage will be modified month to month because the interest rate will shift after a certain period has passed.
2. The interest rate
A fixed- or adjustable-rate mortgage is just one facet of the interest rate on a mortgage. How much homeowners pay for their mortgages depends on how high the interest rate is. The interest rate is dependent on their credit scores and other loan qualification standards at the time they applied for the mortgage, as noted by The Wall Street Journal on March 13th. When rates are low, home buyers should lock in these rates before they go up to take advantage of lower monthly payments.
3. Private mortgage insurance
When home buyers put a down payment for their homes, the lender will provide the remaining funds for the buyer to purchase the home. Since this is a substantial amount of money, banks will want to know that the home loan will be repaid, which is why they may require borrowers pay private mortgage insurance each month in addition to the principal and interest on the loan.
First-time home buyers interested in home loans can contact The Federal Savings Bank, a veteran owned bank, to learn more about mortgages.