Understanding Mortgage Loans - Making the Right Investment For Your Family
Del Norte Credit Union is dedicated and determined to help families and individuals around New Mexico find the right mortgage loan based on unbiased advice. Owning a home is an investment that gives you the freedom to express yourself and an opportunity to put down roots. But if you need to take out a home loan, you need to understand the basics.
What’s a Mortgage Loan?
A mortgage is a loan used to finance the purchase of a house, and this means that you buy a property without paying the entire value up front. The loan is secured on the house you buy, and the lender can foreclose if you default on paying the mortgage. Regular payments are made toward the interest and principal over a set term. Also, a mortgage can be refinanced by taking out a new loan and paying off the original one.
Mortgage Loan Term: This is the period you have to repay your loan. Generally, loans with shorter terms have higher monthly payments and lower interest costs than loans with longer terms. Mortgages typically come in terms of 10, 15, 20, or 30 years.
Interest Rate Type: There are two basic types of interest rates; fixed and adjustable. These give rise to three different types of loans:
- Fixed-Rate Mortgage: This loan has a set rate of interest that remains constant throughout the life of the loan, protecting homebuyers from interest rate fluctuations. Fixed-rate mortgages enable buyers to make smaller, predictable payments over an extended period.
- Adjustable-Rate Mortgage (ARM): Also referred to as a Variable-Rate Mortgage, an ARM has an interest rate that fluctuates based on the market condition. An increase in interest rates, for instance, will result in higher monthly payments. Variable-rate mortgages have lower initial interest rates and are much more flexible.
- Hybrid ARM: This loan has the characteristics of both adjustable-rate and fixed-rate. It starts off with an initial period of fixed interest rate after which it switches over to an adjustable rate. For instance, a 5/1 Hybrid ARM will have a set period of 5 years and thereafter, a change in the rate once every year.
Interview with Lisa Muñoz, DNCU Loan Officer
Types of Mortgage Loans
Mortgage loans are categorized based on whether they part of a government loan as well as the size of the loan. They include conventional, FHA, and special programs. Each type of loan is designed for different situations. At DNCU, we offer conventional loans at competitive rates.
Mortgage Insurance in New Mexico
If you can’t afford a 20 percent down payment, private mortgage insurance (PMI) may help you become eligible but will add to your costs. To learn more and get a mortgage loan in New Mexico, contact Del Norte Credit Union for a consultation.