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What Is a Home Purchase Loan?

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A home purchase loan, or a mortgage, is a loan used to finance the purchase of the house. For most people it is the largest loan in their lives. Generally, mortgage terms are 15 or 30 years. During this term you need to make monthly payments.

Obtaining a mortgage, you are signing a legal agreement and become responsible for covering the body of the loan, interests plus extra costs. The home is the collateral for such a credit.

Signing an agreement, you make a down payment to decrease the principal, or amount owed to the lender. Generally, it is about 20 percent of the total price of the house. There are also cases when you can get a no-down payment mortgage. For the repayment period you will have to make regular payments calculated as a defined interest from the borrowed amount.