Mortgages
Definition: A mortgage is a type of loan specifically used for purchasing real estate. The property itself serves as collateral, meaning if the borrower fails to repay the loan, the lender can seize the property. Mortgages are typically long-term loans (15-30 years) and come with either fixed or adjustable interest rates. For young people planning to buy their first home, understanding how mortgages work is critical for financial preparedness.
Types:
- Fixed-Rate Mortgages: These mortgages have an interest rate that remains the same throughout the life of the loan. Learn more at Fannie Mae's Mortgage Guide.
- Adjustable-Rate Mortgages (ARM): The interest rate on these mortgages can change periodically based on market conditions. More information is available at Mortgage News Daily.
Important Considerations:
- Down Payment: Typically, 20% of the home's purchase price is required upfront, though there are programs that allow for smaller down payments. Research options at NerdWallet or Quicken Loans.
- Monthly Payments: Include the loan’s principal and interest, property taxes, and insurance (PITI).
Why it’s important: Knowing how to evaluate mortgage options ensures that young people can afford homeownership without overburdening themselves financially.
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