Owning Your Own Home

The American dream is the belief that, through hard work, courage, and determination, each individual can achieve financial prosperity. Most people interpret this to mean a successful career, upward mobility, and owning a home, a car, and raising a family.

At the core of this dream is based on owning a home. Since your house is likely to be the largest investment you’ll ever have, mortgages were created to assist you in paying for it. A mortgage loan is simply a long-term loan given by a bank or other lending institution that is secured by a specific piece of real estate.

Because houses tend to be expensive, banks allow you to repay them over extended periods of time, known as the “term”. Terms can range from 10 to 30 years. Shorter terms often have lower interest rates than longer term loans. However, longer-term loans may offer the advantage of having lower monthly payments.

In the old days, a nearby savings and loan might lend you money to purchase your home if it had enough cash lying around from its deposits. Nowadays, the money for home loans primarily comes from three major institutions: The Federal National Mortgage Association (known as Fannie Mae); the Federal Home Loan Mortgage Corporation (known as Freddie Mac); and the Government National Mortgage Association (known as Ginnie Mae). After funding your loan, the bank is likely to sell the loan to one of these three. They may continue to receive your monthly payments or sell the servicing to another lender.

When you have a mortgage loan, your monthly payment will generally include the following:

•    An amount for the principal amount of the balance

•    An amount for interest owed on that balance

•    Real estate taxes

•    Homeowner’s insurance


Home Mortgage interest rates come in several varieties. With a “fixed rate mortgage loan,” the rate and the principle and interest part of your monthly payment remains the same for the life of the loan. With an “adjustable rate mortgage loan,” the interest rate changes based on a specified index. As a result, your monthly payment amount will fluctuate periodically.

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