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Frequently Asked Questions About Loans
What is a mortgage loan? A mortgage loan is a financial arrangement where a borrower receives funds from a lender to purchase or refinance a home. The borrower agrees to repay the loan over a specified period, typically with interest.
How does a mortgage loan work? A mortgage works by allowing you to borrow money to buy a home. You make a down payment (a percentage of the home's purchase price), and the remaining amount is financed through a loan. You then make regular monthly payments, including principal and interest, over the loan term.
What is the difference between a fixed rate & adjustable rate mortgage? A fixed-rate mortgage has a constant interest rate and monthly payments throughout the loan term. An adjustable-rate mortgage (ARM) has an interest rate that may change periodically, affecting your monthly payments. ARMs often start with lower rates but can increase over time.
How much can I borrow for a mortgage? The amount you can borrow depends on various factors, including your income, credit score, debt-to-income ratio, and the lender's criteria. Lenders often use a percentage of your income to determine the loan amount, and a financial advisor or mortgage broker can help you assess your borrowing capacity.
What is a down payment and how much should I put down? A down payment is a lump sum payment made upfront when purchasing a home. The typical down payment is around 20% of the home's purchase price, but some loan programs allow for lower down payments, such as 3-5%. A larger down payment often results in lower monthly payments and may impact loan approval
