The most critical document of the loan process is the loan contract. The loan contract is the most important document because, by signing it, you are agreeing by law to fulfill the lender’s terms and requirements of the loan.
The three concepts that should be considered before obtaining a home mortgage are the following: (1) time horizon (how long you are going to live in the house), (2) your preference for low required payments, and (3) your tolerance for interest-rate risk.
The benefits of getting a fixed-rate mortgage are: (1) more of your payment goes towards principal, (2) interest-rate risk is transferred to the lender, and (3) there is no risk of negative amortization. The benefits of getting a variable-rate loan are (1) a lower interest rate, (2) a lower monthly payment, and (3) no risk of negative amortization.
