What is Mortgage
This is an agreement which allows you to borrow money from a bank or similar organization, esp. in order to buy a house or apartment, or the amount of money itself.

Mortgage Type
- Fixed rate mortgages
With a fixed rate mortgage you have the comfort of knowing that the monthly principal and interest payment (P&I) for your home will be the same for the life of your loan. With the benefit of different terms you can:

• make the choice to have a lower, more affordable monthly payment with a longer-term loan (up to 30 years)
• or increase the equity in your home faster by paying a higher payment with our shorter-term loan (15 year term) so that your loan is paid off faster
• or increase your monthly payment when you want. With no prepayment penalties, you can build the equity in your home faster while still having the benefit of a lower required monthly payment that comes with a longer-term loan

-Adjustable rate mortgages
State Farm Bank's adjustable rate mortgages (ARM) offer you the benefit of lower rates and monthly payments. The rates are fixed for an initial period of time (depending on the adjustment period of the loan), then the rate and payment can adjust annually. The best loan for you may be determined by how long you plan to stay in your home.

• if you stay in your home for less than five years, a shorter term ARM may be your best option; this would allow you to have a lower initial monthly payment
• if you are planning on staying in your home longer, look to our longer term ARMs that offer you the stability of a fixed rate and payment for a set time, yet at a rate and payment that is lower than the fixed rate mortgage options
• or increase your monthly payment when you want. With no prepayment penalties, you can pay an additional amount to your loan and see the effect in the lowering of your monthly payments after the next adjustment period

- Balloon mortgages
State Farm Bank's balloon mortgage program may be right for you; it allows you a lower rate and payment than our fixed rate mortgages. A balloon mortgage is amortized over 30 years, however, at the end of the balloon period (for example - 7 years), the loan is due and payable (you must refinance or pay off the loan). A balloon mortgage may be a good fit for a homebuyer that knows:

• they want to get a larger home now (with a balloon, rates and payments are often lower than a fixed rate loan)
• their income will increase in the future
• their income will increase in the future
• or they will be moving by the end of the balloon period

Terms You Need to Know

• APR
  Annual percentage rate (APR) is the cost of the loan plus note rate and fees, expressed as a yearly rate. May be a half-percentage point higher than the loan rate.
• Closing costs
  When they complete a real estate transaction, buyers pay the lender's fees and costs for home inspection, recording the deed, title insurance, attorney's services and state or local taxes. Sellers pay different closing costs.
• Commitment
  A written statement from a lender that specifies the amount it's willing to loan you, at what rate and for how long.
• PMI
  Private mortgage insurance (PMI) is required on all loans greater than 80 percent. You don't need it after you have 20 percent equity in your house.
• Points
  An upfront fee charged by a lender to process a mortgage. Each point represents 1% of the loan amount. So a $120,000 loan "with one point" means a fee of $1,200. For most (but not all) loans, the points must be paid at the close of escrow, and cannot be added to the amount of the loan.
  
  More loan related terms