Understanding the building-blocks of a mortgage may help you compare your options. Your monthly payment is based on a complex calculation that changes over time, so "getting the picture" can be tricky! The biggest pieces are: Loan Amount Interest Rate Term (years to pay off) Payment Schedule Down Payment Equity Down payment and equity are of course closely related, but remember that your equity changes as loan payoff proceeds. This short video visualizes the way these factors relate to help you make sense of the math.

Adjustable Rate Mortgages commit buyers to making loan payments that may change over time as market interest rates change. If interest rates go up, payments go up and the borrower has to meet those payment obligations. ARM rates may be lower than fixed rates now. Look at your personal situation to assess if you can handle the risk of future increases. Is your income likely to increase over the years to come? Will you be staying put, or do you anticipate selling the home and moving? While an ARM may put a larger loan amount in reach now, make sure you can keep up with that commitment if rates increase in the future.

The down payment on a home affects many things — what home you can afford, loan size, financing terms and more. Getting some sense of the down payment you can afford can be difficult; people are quick to share advice from their experience, but conditions may have changed. In general, the higher the % of the purchase that you can cover in the down payment, the better the loan terms as a whole are likely to be. 5% of the home is currently the minimum down-payment amount. Keep in mind that any amount under 20% will generally require a mortgage insurance policy, which does increase borrowing costs. Keep in mind that the down payment is not the only sizable payment involved in buying a home. You will also need cash for closing expenses, moving, decorating, furnishing and possibly repairs. Check your credit history when youre sizing up down payment and loans; its also a vital part of the equation.

The term "mortgage" is commonly used to refer to the loan someone obtains to buy a home or property. Technically, the loan is one part of the arrangement. The other — the mortgage itself — is a legal claim (a "lien") that gives the lender rights to the home or property used as security, until the loan is paid off. The loan component of the financial package has two key features you should understand. Principal — the amount you are borrowing. For the lender, risk is balanced by their lien on the property. Interest — the additional amount you are paying, over time, to borrow the principal. Because mortgage loans usually take years to pay off, understanding that interest is compounded — "interest on interest" — will help you make sense of the total cost of the home. For fun — the roots of the word "mortgage" are death (mort) and pledge (gage). It captures the long-term promises involved in buying a home.

New-home builders frequently offer additional terms to help close sales quickly; these are usually called "incentives." Incentives are frequently used at critical times, like the end of a financial period, or for particular models or lots. Here are some of the most common: Cost-reduction incentives reduct short-term or up-front costs. For example, a builder might use a cash contribution to closing, or waiver of premiums on the lot, as cost-reduction incentives. Value-add incentives provide upgrades to the home being purchased. A decorating allowance to upgrade appliances, floors or fixtures is a common value-add. Value-to-buyer incentives are not necessarily connected to the house, but they are of value to the buyer. A trip to Hawaii, a car lease, or a big-screen television are all examples of this. Time-to-close incentives speed up the process. For example, if the builder has arrangements with a lender, with details of their project and models already in place, the buying process could be accelerated. While incentives can be emotionally tempting, try to evaluate them neutrally. Would you BUY the item or addition? What will it actually cost over time as part of the mortgage? Is the price fair or inflated? With lender arrangements, ensure that the terms are still fair compared to market terms. As a final check, get advice from your real estate agent or certified new-home cobroker.

A home inspection provides a professional eye on the current safety, structure, construction and mechanical systems of the house. The buyer is not required to be present. However,if the inspector allows, taking notes and pictures as they do their job — without impairing their ability to do the job — are a valuable opportunity. Generally, after the inspection they will be available to answer questions about the report and any problems noted in the report. Objective, expert opinion about such an important asset is valuable. Take the time and opportunity to learn and ask maintenance questions, and to "get acquainted" with the new house you may own soon.

Make sure to check a few practical risks in the decision process for a new home, including: Natural disaster risks Is it in an earthquake-prone area? Is earthquake insurance available, and how much does it cost? Likewise, are hurricanes a risk? Tornadoes? How high does the property sit, and is there a risk of flood? (Watch the video on floods here on Video-Genius.) Are there hazardous materials in the area? Building Code compliance; the house should meet local codes. Local zoning and (if applicable) homeowner association rules can also play a big role in future changes. If you envision remodeling, making an addition, or other substantial changes, be sure you understand the regulations and permits that will be involved.

Discrimination against home buyers is illegal and wrong; race, faith, gender, citizenship, abilities or impairments or family status cant be a factor, by law. If you feel discrimination is affecting or influencing your home-buying process, contact HUD - the U.S. Department of Housing and Urban Development. HUD maintains a hotline for filing complaints. Call (800) 669-9777, or File a complaint online at https://www.hud.gov/program_offices/fair_housing_equal_opp/online-complaint