What is a Mortgage? A beginner’s guide.
So you’ve heard that you need a mortgage… but what exactly does that mean?
A mortgage is a type of loan that is used to finance the purchase of a property, such as a house or a condo. Mortgages are typically long-term loans that are repaid over a period of 15 to 30 years, with the property serving as collateral.
If you’re unsure where to start, give Sam a call!
Types of Mortgages
There are several different types of mortgages that you should be familiar with. While not exhaustive, the list includes:
Fixed-rate mortgages: With a fixed-rate mortgage, the interest rate and monthly payments remain the same for the life of the loan. This provides stability and predictability, but can result in higher payments initially.
Adjustable-rate mortgages (ARMs): With an adjustable-rate mortgage, the interest rate and monthly payments can change over time, based on market conditions. This can result in lower payments initially, but can be riskier in the long run.
FHA loans: FHA loans are mortgages that are insured by the Federal Housing Administration. They are designed to help people with lower credit scores or smaller down payments qualify for a mortgage.
VA loans: VA loans are mortgages that are guaranteed by the Department of Veterans Affairs. They are designed to help veterans and active-duty military members qualify for a mortgage.
How Mortgages Work
Mortgages work by providing the borrower with a lump sum of money that is used to purchase a property. The borrower then makes monthly payments to repay the loan, plus interest. If the borrower fails to make payments, the lender can foreclose on the property and sell it to recoup their losses.
The amount of the mortgage loan depends on several factors, including the price of the property, the borrower's credit score, and the amount of the down payment. The down payment is a percentage of the purchase price that the borrower pays upfront, typically ranging from 3% to 20%.
Final Thoughts
A mortgage is a type of loan that is used to finance the purchase of a property. By understanding the different types of mortgages and how they work, you can make informed decisions about your home financing options. If you're interested in applying for a mortgage, be sure to shop around and compare offers from multiple lenders to find the best terms and interest rates for your situation. If you’re unsure where to start, give Sam a call and he’ll point you in the direction of some truly excellent lenders!
