Mortgage Help   Mortgage Rates Real Estate Credit Foreclosure Tax Mortgage Rates Mortgage Basics Chapter 1: How much house can you afford? Homeownership Should You Buy or Rent Summary   Chapter 2: Adjustable-rate mortgages ARM and a fixed-rate mortgage Fixed-rate mortgages Understanding the key elements Which type of lender is right for you? Other types of mortgages Subprime Summary   Chapter 3: Your credit score Down Payment How lenders set rates Low down payments Mortgage insurance Your mortgage payment Mortgage Points Summary   Chapter 4: The good faith estimate Inspection and Insurance Necessary paperwork for a buyer Other lender paperwork Paperwork and fees Prequalification and preapproval Special circumstances Summary   Chapter 5: Ten questions to ask Turned down for a mortgage Underwriting What lenders ask Summary   Chapter 6:  Understanding the closing process Escrow Summary   Chapter 7: When your mortgage is sold Avoiding foreclosure Paying ahead Payment changes Refinancing Removing mortgage insurance Summary Summary A mortgage is simply a loan that uses the home you purchase as collateral. Most are designed to be paid off in 15 to 30 years. Most borrowers will pay one-twelfth of their annual mortgage payment to property taxes and homeowner's insurance. This is usually set aside in an escrow account, with a portion of your monthly mortgage payment going into it each month. The lender then pays the taxes and insurance premiums to ensure that they are made in a timely fashion. There are four, and sometimes five, parts to a mortgage payment. The first four are called PITI, which stands for principal, interest, taxes and insurance. Some borrowers will be required to pay private mortgage insurance premiums in addition to the PITI. Fixed-rate mortgages and adjustable-rate mortgages are the two basic types of mortgages. A fixed-rate mortgage has a set interest rate and monthly payment amount for the entire life of the mortgage. An adjustable-rate mortgage, also called an ARM, has a rate that adjusts according to market interest rates. It can go up and down. Some loans are a combination of fixed and adjustable rates, called hybrids. You should weigh the pros and cons of each type of mortgage before you decide which is best for you. The initial interest rates on ARMs are typically lower than fixed-rate mortgage rates, but you have the risk of the rates rising over time. You should consider how long you want to live in the house, how often the ARM adjusts, how high the payment could go and whether rates are going up or going down. People with poor credit are able to secure a mortgage, but they will pay higher interest rates and face stricter terms. These subprime mortgages are designed to help consumers purchase a home. Most subprime mortgage companies are ethical and legitimate, but there are predatory lenders out there that target the subprime borrower. There are many different types of lenders to choose from. The decision can be a hard one to make. Mortgage lenders, mortgage brokers and banks, thrifts and credit unions make up the majority of mortgage lenders.