PITI? ARMs? What do all these home mortgage terminologies mean? Don’t stay lost, read more and learn the basics to home mortgages.

At some point in your life you’re probably going to have to get a mortgage to secure a home for yourself and your family. But do you really have any idea what a home mortgage means?

A home mortgage can be defined as a loan from a bank where the house itself serves as the collateral for the loan. Because a home mortgage is usually a very large loan, consumers are expected to pay off the loan in about 15-30 years.

A monthly mortgage payment is also known as a PITI payment. That's because each one covers a portion of the following four costs:

Principal - the loan balance
Interest - interest owed on that balance
Real estate taxes - taxes assessed by different government agencies to pay for school construction, fire department service, etc.
Property insurance - insurance coverage against theft, fire, hurricanes and other disasters

One thing to keep in mind that the longer the length of the loan for your home mortgage, the larger your down payment will be. But this also means that your monthly payments will be smaller. The interest rate is of course an important thing to note down and in most cases the amount of down payment that you make will influence the amount of interest rate. The normal consensus in this case is that the larger the down payment for your home loan, the lower the interest rate.

You should also realize that there are two different types of home mortgages.

• Fixed rates mortgages – This type of home loan has interest rates that stay fixed for life. Thus is less risky but less flexible.
• Adjustable rate mortgages – Known as ARMs, this type of home mortgage is riskier but has the potential to be cheaper. The initial rates for ARM home mortgages are generally lower but because they are adjustable, the rates may go up or down.

Certain online mortgage lenders also have special programs that assist low-income or first-time homebuyers. So when you’re shopping around for your home mortgage, be sure to enquire about these programs.

Lastly, a home mortgage may not only be for first time house buyers but home mortgages could also be for people who wish to refinance their original home loan.

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