Getting a mortgage can be overwhelming!  How can you find the best loan?  One way to find out is to do some research about the most important parts of a loan.  Then you will be able to compare the information.  It makes it a little bit easier to find the best loan for you.

How much money can you borrow?  The “principal” is the price that your home is worth minus the down payment.  Banks will consider this when deciding how much to offer you a loan for.  How much money you can borrow is going to determine how expensive of a house you can buy.

What kind of mortgage is it?  There are two types of mortgages.  A fixed rate mortgage means that you will pay the same amount each month until you have finished paying off the entire mortgage.  Fixed rate mortgages are considered to be much less risky than adjustable rate mortgages, or ARMs.  An adjustable rate mortgage will start you with a lower interest rate than a fixed rate mortgage will.  The disadvantage is that you will be paying a different amount of money each month, depending on the market.  Find out which type of mortgage is being offered to you.

Find out about the interest rate and the monthly payment.  You might want to look for the loan with the lowest interest rate.  Sometimes a low interest rate will come with a higher closing cost.  Low monthly payments may be tempting, but have disadvantages.  If your monthly payment is too low, it means that you will only be paying off the interest, and never manage to reduce the principal amount of the loan.

How long is the loan for?  This is called the “term” of the loan.   Most mortgages are for either fifteen or thirty years.  Shorter-term loans mean that you are paying higher monthly payments, and will pay off the entire loan sooner.  Longer-term loans mean that you will have lower monthly payments, but will take longer to pay off.

Each loan will come with “closing costs”.  These have different names, but are basically what the bank adds on as a charge for borrowing money.  Make sure you ask about this so you aren’t taken by surprise when the time comes to sign the loan. These are not the only factors to consider. Compare everything in order to find the best loan for you.