Fannie Mae Foundation: How to Buy a Home

Note to the teacher:
The following information and accompanying form can be used in a number of ways. Here are two possibilities: the teacher can review the terms in class and assign particular students, or groups of students, to research banks and then come back and share the information with the rest of the class; or the teacher can collect the information and ask students to compare.

Activity: Looking for a Mortgage Vendor

Shelley Emmer, New York Association for New Immigrants, New York, NY

Who? Lending institutions

Savings banks
Savings and loan associations
Commercial banks
Credit unions
Mortgage bankers
Mortgage brokers
Government agencies (Department of
Housing and Community Development)

How? The search

Your own bank or credit union
Real estate agent
Friends, coworkers
Real estate section
Yellow pages (under mortgages, banks,
savings and loans, credit unions, and financing)

What? Defining and understanding the mortgage

PRINCIPAL: How much; depends on your down payment
INTEREST: How much the lender charges to borrow the money
TIME: 15–30 years
Longer time means smaller monthly payments but more interest
Shorter time means larger monthly payments but less interest
POINTS: A percentage of the loan. You can pay additional percentage
at closing, and this will reduce the interest payments you make over
the course of the loan.

Which? The two most common ways to borrow

FIXED-RATE (15, 20, 25, or 30 years) MORTGAGE:
You agree to pay the same interest throughout.
ARM (adjustable-rate mortgage): At the beginning
of the loan, you get a lower interest rate (between 1
and 3 percent less), but the figure can rise after the
first year. Some mortgages will protect you from very
high increases. The mortgage will limit how high the
interest can go. This is called a cap. It is either 5 to 7
percent over market rate or a certain percentage.

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