Buying your first home is really exciting , but you need to know a lot about what you are committing to, and how you will be able to afford your home. You need to do some serious homework, but this is relatively easy, as there are many mortgage companies who will help you to keep informed about mortgages and home buying.
There are two basic types of loans, fixed rate loans and adjustable rate mortgages (ARMs). Fixed rate loans give you a fixed interest rate for the life of your mortgage. You have a choice of 10, 15, 20 and 30 year periods for the loan, but most people choose 15 or 30 years. These mortgages are good if the interest rate is low when you take out your mortgage, and you plan to stay in the house for at least 5 years.
Adjustable rate mortgages have variable rates over the life of the mortgage. There are a variety of different mortgages under this category, some of which have fixed interest rates for periods of the mortgage, for instance for the first five years, and then the interest rate will be adjusted according to a specific index such as Treasury bills. This can be useful if you expect your income to increase dramatically in the future, or if you are planning to move in the first five years.
Whichever kind of mortgage you choose, do your homework and make sure that you understand how much your total monthly costs for your mortgage are going to be.
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