If you are in the market for a new mortgage or refinancing your current mortgage, you need to do your homework and shop for the best mortgage deal. Doing your homework means learning mortgage basics; here are the fundamentals to get you started.

Mortgage Interest Rates: Fixed Rate or Adjustable

Which type of interest rate depends on your situation and your tolerance for risk. If you have a low tolerance for risk and want a mortgage payment that is fixed over the duration of the loan, you will want fixed interest rate. Fixed rate mortgages are slightly higher than adjustable rate mortgages because of this added security.

If you need the lowest payment possible as a stop-gap measure for your finances, an adjustable rate mortgage may be right for you. The type of adjustable rate mortgage you choose also affects your payment amount. There are interest only and option mortgages that provide very low payment amounts; however, these mortgages carry significant risk and should only be used as a short-term fix.

Loan to Value Ratio Explained

Loan to value is a ratio of the amount you are borrowing against the market value of your home. For example, if your home is worth $150,000 and you want to borrow $80,000 your loan to value ratio is 53%.

Mortgage lenders do not like loan to value ratios greater than 80%; if your loan to value ratio is higher than this amount you may need to seek financing from nontraditional lenders. These nontraditional mortgage lenders write mortgages for 100% to as much as 125% or your home