• Purchasing a home is an important financial investment. You need to be aware of the types of mortgages available, how much cash will be required as a down payment and what you are getting for your money. You have the right to ask questions about anything you do not understand during the process. A few of the most common questions will help you understand what sort of information to ask about.
  
  

What Types of Loans Are Available?

• The two main types of loans are fixed-rate and adjustable-rate mortgages. As the names imply, fixed-rate mortgages are locked into a set interest rate throughout the course of the loan, and adjustable-rate loans will have interest rate adjustments at predetermined intervals or even require balloon payments against the mortgage to offset low initial interest payments. Both types of mortgage come with the choice of longer or shorter terms of repayment. Most standard home loans are for 15 or 30 years, but other terms are available.
  
  

How Much Down Payment Is Required?

• How much down payment you will need depends on your credit score. Expect to pay 3 percent or more as down payment with a good or better credit score. Some real estate companies may have a set percentage that differs from other lenders.
  
  

Can I Pay the Loan Off Early?

• With few exceptions, you are entitled to pay off the home loan at any time. Some adjustable-rate mortgages include prepayment penalties to discourage early repayment. The reason for this is that repaying the loan early reduces the amount of the balloon payments you face with the rate is adjusted. Prepayment penalties may be as much as 3 percent of the loan, according to the U.S. Department of Housing and Urban Development, making the best course of action to allow the penalties to expire before prepaying the loan.
  
  

How Does Early Payout Work?

• One of the most common methods of early payment on a mortgage is to double your monthly payment. During the early years of a home loan the interest on the loan takes up a majority of your mortgage payment, and only a small amount is applied to the actual loan value. Larger payments decrease the principal, making the mortgage term shorter. Another advantage of early or double payments is that the extra money is applied to your home equity, which is beneficial for credit scoring and borrowing against the mortgage.
  
  

What Is Included in my Monthly Payments?

• Your monthly payments include the interest on your home financing loan and a portion of the principal. Over time, the amount the principal payment increases as the calculated interest decreases. Your monthly payments are also used to pay mortgage insurance, which guarantees the lender payment in the event the home is lost. Mortgage companies also include property taxes and other home-related costs, such as homeowner's insurance, in the mortgage.