A mortgage is a type of loan specifically used to buy a home or real estate. The property itself acts as collateral, meaning the lender can take the home if you don’t repay the loan.
🏠 Key Components of a Mortgage
| Term | Meaning |
|---|---|
| Principal | The amount you borrow |
| Interest | The cost you pay to borrow the money (expressed as a rate) |
| Term | Length of time to repay the loan (commonly 15, 20, or 30 years) |
| Down Payment | The upfront payment you make (usually 3%–20% of home price) |
| Escrow | Account for property taxes and insurance, paid monthly along with mortgage |
📊 Types of Mortgages
| Type | Description |
|---|---|
| Fixed-Rate Mortgage | Interest rate stays the same for the entire term |
| Adjustable-Rate Mortgage (ARM) | Interest rate changes after an initial fixed period |
| FHA Loan | Government-backed loan with lower down payment, for first-time buyers |
| VA Loan | Loan for veterans with favorable terms |
| Jumbo Loan | Loan exceeding conforming loan limits (for expensive homes) |
💰 How Much You Pay Monthly
Your monthly mortgage payment typically includes:
- Principal + Interest
- Property Taxes
- Homeowners Insurance
- (If applicable) Private Mortgage Insurance (PMI) — usually if your down payment is less than 20%
🏦 How to Get a Mortgage
- Pre-approval: Bank or lender reviews your financial info and gives an estimate of how much you can borrow.
- Find a Home: Shop for a house within your budget.
- Apply: Submit full mortgage application.
- Underwriting: Lender verifies your info and appraises the home.
- Closing: Sign documents, pay closing costs, and get the keys.
✅ Tips for Getting a Good Mortgage
- Improve your credit score before applying.
- Save for a bigger down payment to avoid PMI.
- Shop around for lenders and compare rates.
- Understand all fees (origination, appraisal, closing).
- Consider loan term impacts on payments and total interest.