If you are getting a mortgage loan, you are essentially getting a type of financing to purchase residential property. The loan uses your purchased home as collateral. This means that if you default on the financing the lender can foreclose on the home and sell it to recoup their money.
To keep your credit in good standing and to avoid foreclosure, you need to make mortgage payments in full and on time. Home mortgages come with terms and paperwork, and it’s important to understand the terms before you sign.
One thing you will notice is you are paying not just the amount borrowed (principal) but also interest, taxes and insurance. Sometimes, these parts of your monthly payment are referred to as PITI. At first, much of your monthly cost will go towards interest. Later in your loan, more of your monthly payment will go towards the principal. You can ask your lender for a table of how much you’ll pay through PITI. This table is sometimes known as an amortization schedule.
Types of Mortgages
Choosing the right home mortgage loan plays an important role in ensuring you can meet your financial obligations. At PeoplesBank, we offer a range of personal mortgages to our clients:
First-Time Home Buyer Mortgage: If you have never purchased a home before, first time home mortgages let you buy a home with a few benefits. PeoplesBank first-time home loans offer a 30-year term with no mortgage insurance and a fixed term, so your payments stay the same. With this type of financing, you can buy with as little as 3% down, and the mandatory First-Time Home Buyer education allows you to start homeownership right.
Fixed-Rate Mortgage: Fixed-rate mortgages are a popular option. These loans have interest rates that stay the same year after year, making budgeting easy. These mortgages are a good way to lock in low-interest rates, and they allow you to build equity fast if you choose a short loan term.
Adjustable-Rate Mortgage (ARM): ARMs allow you to enjoy lower interest rates at first, but the interest rates will go up over time. This may be the right option if you are a new homebuyer and expect your earning power to increase over the term of your loan. You can enjoy lower costs now.
Construction to Permanent Mortgage: Want to build your dream home? This ARM loan allows you to enjoy ARM low-interest rates during the up to nine months you spend building your home. Thereafter, it switches to a mortgage automatically. This way, you get the funds you need for building and can continue to pay for your home while you live in it. Since you pay only interest during the construction phase, you’ll have the flexibility to set up your home just as you wish.
Lot Loans: If you have a credit score of at least 660, you can use this type of financing to buy the perfect lot to build your dream home.
USDA/Rural Housing Mortgage: These fixed-rate mortgages are guaranteed by the United States Department of Agriculture (USDA). If you meet income requirements and are buying eligible rural property, this financing allows you to buy with flexible terms, low insurance, competitive rates and low or even no down payment.
VA Mortgage: These fixed-rate mortgages are available to active members of the military and veterans. VA loans come with many benefits, including savings on mortgage insurance. This form of financing also allows veterans to buy with up to 100% financing.
Learn More About Homeownership
Explore the benefits and costs of buying and owning a home through the interactive playlists available in our Financial Learning Center.
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