Step 3 – Understand the Five Parts of a Loan

A loan contains five basic parts:

• Term (length of loan)
• Interest rate (adjustable or fixed)
• Points (pre-paid interest at closing)
• Closing costs (fees for processing the loan)
• Down payment (a buyer's investment in the house)

It is best to look at these parts as they affect you when you buy your house and on a monthly basis as you pay for your house.