Most families don’t have the cash on hand to make a significant real estate purchase, so they need the help of a lender to buy a home. Mortgage loans give you the buying power to achieve the dream of homeownership, but many people aren’t quite sure how the process of financing a home works. If you’re planning on leaping into the real estate market, below are a few things you should understand about mortgage loans.

A Brief Introduction to Mortgages

What Is a Mortgage?

A mortgage is much like other loans, with a lender providing financing for a specific purpose. However, they do involve much more substantial sums of money than other loans, so the lender takes an interest in the property to secure their investment. When you pay off the mortgage, the bank turns over a clear title that gives you full ownership of your home. However, if you default, the lender will seize the property and sell it through a process called foreclosure to minimize their losses.

What Is Included in the Mortgage Payment?

Every month, your mortgage loan payment covers a portion of the original amount you borrowed, as well as the interest charged by the lender. Some lenders bundle your property tax payments and homeowner’s insurance premiums into the mortgage loan payment, as well.

The Types of Mortgage Loans

Lenders offer a variety of loan types, each of which is ideal for buyers in different situations. Fixed-rate mortgages have locked-in interest rates that will never change, regardless of fluctuations in the market. Variable-rate mortgages are continuously adjusted to current rates, so your payments may rise and fall along with the market. Buyers also have the option of choosing the length of the loan term, which is usually 15 or 30 years. If you want a shorter term, the monthly payments will be higher. If you opt for a longer term, you will pay more in interest, but your monthly installment will be significantly lower.

If you’re planning to buy a home anywhere in Warren, St. Charles, or Gasconade counties, The Missouri Bank in Wentzville, MO, offers affordable loans and the personal attention you need to make the right choice. Since 1939, they’ve been helping people throughout the area achieve their dreams of homeownership, and are committed to providing the best service possible. Visit their website to learn more about their mortgage loan products, get more financial tips on Facebook, and call (636) 327-4900 to speak to an officer in Wentzville. To reach their Foristell location, call (636) 673-1430, or dial (636) 456-3441 for their branch in Warrenton.