Buying a Home: The Missing Manual

Chapter 7. Compare Mortgages and Other Financing Options

No matter how big your piggy bank, you aren’t going to find enough pennies in it to buy your new home. Most people don’t have the cash to buy a home outright, so they need help from a financial institution—a commercial bank, credit union, savings and loan company, or mortgage company.

Getting a mortgage is probably the most complex and confusing part of buying a home, but it doesn’t have to be. You just need to understand your options and know what to look for as you read the fine print in a loan document. This chapter introduces you to the wonderful world of mortgages and real estate financing. You’ll learn the basics of homeowner lending, including its relevant terms, and see how lenders process loan applications. You’ll find out about many types of mortgages, and which may best fit your circumstances. And finally, you’ll read about government programs for homebuyers and how to get creative with financing.

Mortgage Basics

Talking with a mortgage broker can feel like conversing in a language you studied for a year in high school. You might get the gist of what he’s saying, but you might not fully understand what everything means. Don’t get lost in translation. Before you apply for a mortgage, make sure you understand the basics.

What Is a Mortgage?

That’s easy. A mortgage is money you borrow to buy a house and pay back over time, with interest. Even though that’s how most people define the word mortgage, it isn’t technically a ...