Mortgage Loan Facts You Can Use

Lenders usually expect you to make a down payment of between 10 and 20 percent of the house's price and to pay closing costs, often three to six percent of the loan amount.

There are two major types of mortgage loans or home loans - those with fixed interest rates and monthly payments and those with changing rates and payments. However, there are many variations of these plans on the market, and you should shop carefully for the home loan that best suits your needs.

Probably the single most important factor to look for when shopping for a home mortgage or home loan is the annual percentage rate. The APR includes all the costs of credit, including such items as interest, "points," and mortgage insurance.

A general rule is that you usually can qualify for a home loan of two to two and one-half times your household's income. For example, if your family has an income of $60,000 a year, you can usually qualify for a mortgage of $120,000 to $150,000.

Common fixed-rate mortgages include 30-year, 15-year, and bi-weekly mortgages. The 30-year mortgage usually offers the lowest monthly payments of fixed-rate loans, with a fixed monthly payment schedule.

The 15-year fixed-rate mortgage enables you to own your home in half the time and for less than half the total interest costs of a 30-year loan. These loans, however, often require higher monthly payments.

The bi-weekly mortgage shortens the loan term from 30 years to 18 to 19 years by requiring a payment for half the monthly amount every two weeks. While you pay about 8 percent more a year towards the loan's principal than you would with the 30-year, one-payment-per-month loan, you pay substantially less interest over the life of the loan. Keep in mind, however, that with shorter-term loans, you trade lower total costs for smaller mortgage interest deductions on your income tax.

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