What Is A Mortgage? Types And How They Work

With home sales reaching record highs in the last few years, more people are looking to find a stable and affordable way to buy the home of their dreams. Enter the mortgage. Mortgages are a loan that provides you with funds to purchase a home, but there’s more to them than people realize.

Knowing the different types of mortgages, how they work, and which is best for you can help make your home-buying journey as easy as possible.

What is a Mortgage?

Sometimes called a home loan or house loan, mortgages provide you with the money to purchase a home upfront. In exchange, you’ll agree to pay back the loan with interest over time. Mortgages usually have fixed terms (e.g., 15 years) during which the borrower pays back their debt in monthly payments.

The lender also holds a lien on the property until it’s paid off in full, meaning they can take ownership of your home if you fail to make your payments or violate other terms of your agreement. It’s important to know all of these details before entering into any kind of agreement with a lender.

Types of Mortgage Loans

There are many types of residential mortgages available if you are looking to buy a home.

  • Adjustable-Rate Mortgages – Starts with a lower fixed interest rate that increases or decreases over time depending on market conditions
  • FHA Loans – Backed by the Federal Housing Administration and designed to help borrowers with lower credit scores or limited funds for a down payment.
  • Fixed-Rate Mortgages – Offers a consistent, predictable loan payment with an interest rate locked in for up to 30 years
  • Jumbo Loans – Offers higher loan amounts and can be a great option for buyers who don’t qualify for traditional mortgage programs
  • USDA Home Loans – Backed by the U.S. Department of Agriculture and designed for borrowers in certain rural or suburban areas to purchase a home with no money down
  • VA Home Loans – Insured by the U.S. Department of Veterans Affairs and available to qualifying active duty military personnel, veterans, reservists, and surviving spouses

Understanding all the options will help you pick the right mortgage type for your situation.

How Mortgages Work

Mortgages are complex financial instruments, but understanding how they work is key to making an informed decision.

First, you’ll need to find a lender and apply for a loan. This process will involve filling out paperwork and providing documentation such as income statements and credit reports. Once your application is approved, you’ll have access to funds that can be used to purchase your home.

The amount you borrow will then be paid off monthly. During this time, you will also be responsible for paying interest on the loan based on your credit score, income level, and current market conditions.

When your loan term ends (or if you decide to pay it off early), you’ll have paid back both the principal amount and all accrued interest. This means your home is officially yours!

How to Get a Home Mortgage

To start your mortgage journey, you need to find a mortgage lender. You can look at traditional banks or credit unions, but many online lenders offer competitive rates and terms.

Finding an independent Mortgage lender like Boris Cherner can save you time and money by finding a solution tailored to your needs. You’ll also be able to get advice on the best loan options for your specific financial situation.

With his years of experience, Cherner will help guide you through the mortgage process, including providing information about credit scores and other requirements. If you’re looking to get the best deal possible and move into the home of your dreams, contact Boris Cherner today!