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Back to the mortgage basics By Melissa Wirkus

Navigating the mortgage world can make even the smartest and most financially sound person feel like a ship lost at sea.
There are so many different types of loans and programs available today that many potential borrowers loose sight of the big picture. That is why it is important to get back to the basics of taking out a mortgage.
Despite all of the different options and choices a given mortgage product may present to you, every mortgage consists of the same few things.
An informative article posted on mortgagewire.com, “What exactly is a mortgage,” takes us to the roots of every mortgage and helps give a fresh perspective on the industry.
Let’s get a simple definition of our subject at hand:
“What exactly is a mortgage? Simply put, it's a loan from a financial institution to you. In return, you pay interest on the amount loaned. The lender also has first dibs on your house in case you neglect to pay back the loan.”
This is a mortgage in its simplest form.  Of course, once you get going with the mortgage process, you will find that there are various types of mortgages available on the market. The two most common are fixed-rate mortgages and adjustable-rate mortgages (ARMs).  A fixed-rate maintains the same interest rate throughout the life of the loan, usually 15 or 30 years.
An ARM, on the other hand, has a fixed-interest rate for a specific time in the beginning of the loan (such as 1, 5 or 10 years) and then adjusts according to the current market standards.
Regardless of whichever type of loan you end up choosing, you will find that every loan consists of three facets: the size, interest rate and term of the loan.
First off, the size of the loan is the amount of money you need to borrow to finance your home purchase. The more money you have for the down payment, the smaller the size of your loan will be.
The interest rate of a loan can be a bit more difficult to understand because there are various factors involved.
“The annual percentage rate is a method developed under federal law to disclose to loan applicants the actual amount of interest that will be paid on a given loan, over the life of that loan. It makes it easy to compare one mortgage to another by making it an apples-to-apples comparison. You should, however, use the APR as just one tool in evaluating a loan, not as the sole factor in making your decision.”
Points are also a factor in the interest rate. Discount points are charged to lower the interest rate and origination points are charged by the lender, loan officer or broker for “originating” or starting up your loan. Some firms will not charge points at all; it is dependent on your specific situation and the person who is handling your loan.
As for the term of the loan, we touched on that briefly in the beginning when discussing 15- and 30-year fixed rate mortgages. This simply means that the loan will be paid off in 15 or 30 years if you pay the monthly payment on time, every month.
There are many other terms you can get, depending on the loan type, and which one is best for you all depends on the length of time you plan to stay in the house and the size of the mortgages, among many other things.
Now that we have the basics down, contact an LEI mortgage coach today to see the mortgage products that could work for you.

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