One of the most prominent forms of mortgages are fixed mortgages. Unlike the adjustable mortgage
, fixed mortgages let a homeowner know exactly what his or her payments will be
during the length of the loan, generally 15, 20, 25, or 30 years.
Experts generally say that fixed mortgages are preferable to the adjustable rate
if interest rates are low at the time the mortgage is taken out and if
the owner expects to live in the house for at least several years.
Balloon loans carry a fixed interest rate, generally for 7 or 10 years,
at the end of which the borrower must make a lump sum payment of the balance
of the loan or lose the property.
Two federal government mortgage organizations help first time home buyers that
are to benefit consumers are Fannie Mae (the Federal National Mortgage Association)
and Freddie Mac (the Federal Home Loan Mortgage Corporation), which purchase
bundles of home loans
and sell them as securities to investors. Fannie Mae-approved
lenders, for instance, are supposed to help consumers find the lowest cost mortgage
for which they qualify. Both Fannie Mae and Freddie Mac have websites that detail
Whether a fixed mortgage or another type of mortgage, transactions will require:
- Appraisal - a professional appraiser inspects the appearance
of the property and studies the condition of the neighborhood to determine
the property's value and ensure that the property is a safe investment.
- Escrow - Documents and money that are kept by a third party until
contractual conditions are met by the parties involved in a sale of property.
- Closing costs (also known as settlement costs) - Not included in
the property's sale price, these are expenses that must be paid before
title to the property is transferred to the new owner.
Learn more about adjustable mortgages.