Unless you plan to pay cash, you will need to obtain a loan to finance the purchase of your new home. A home loan, also known as a mortgage, is probably the largest amount of debt you will ever take on in your lifetime.

Your mortgage is a legal contract and your home is the collateral. When you sign a mortgage, you're promising that you will pay off the loan in monthly installments over a period of 15 to 30 years. If you don't make your monthly payments, the lender can take your home back and sell it to cover the debt. (This is known as foreclosure).

Your monthly mortgage payment will include principal, interest, taxes and insurance - also known as PITI. This is how PITI breaks down:

Principal: This is the total amount of money you borrow from the lender to buy your home. The principal does not include the down payment you make on a home.

Interest: This is the amount the lender charges you for the money you borrow. The amount of interest you pay is determined by the interest rate on your loan.

Taxes: The tax portion of your mortgage payment includes property taxes charged by your community. The amount of property taxes you pay is based on a percentage of the value of your home. These taxes go to local schools, roads, infrastructure and other community costs.

Insurance: Because your home is probably the single biggest investment you will ever make, you will want to take measures to safeguard that valuable investment. The best way to do that is with homeowners insurance. Most homeowners roll their insurance policy payments into their monthly mortgage payments.

Because there are countless mortgage loans available to home buyers, choosing the right one can be challenging. Take time to shop around and find the best possible interest rate and loan terms.  Contact SOKOLICH REAL ESTATE for a list of local mortgage brokers and lenders in your area.

CHOOSE THE RIGHT HOME LOAN

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