Mortgage Basics

Your mortgage interest rate determines how much you’ll pay in interest over the life of the loan. Rates may be:

• Fixed – The rate remains constant, offering stability in your monthly payments.
• Adjustable – The rate may vary over time based on market trends, which can affect your payments up or down.

Choosing the right type of mortgage depends on your financial goals and eligibility. Common options include:

• Conventional Loans: Ideal for borrowers with strong credit and the ability to make a 20% down payment. These loans offer flexible terms.
• FHA Loans: Backed by the Federal Housing Administration, these loans are designed for buyers with smaller down payments and more flexible credit requirements.
• VA Loans: Exclusively for eligible veterans and active-duty service members, VA loans offer favorable terms and often require no down payment.
• USDA Loans: Tailored for eligible rural homebuyers, these loans offer 100% financing and competitive rates.

Your down payment is the initial amount you pay toward your home. The size of this payment impacts your loan-to-value (LTV) ratio, which can influence your interest rate and whether you’ll need mortgage insurance.

Amortization is the process of gradually paying off your mortgage through scheduled monthly payments. Each payment reduces your loan balance (principal) and pays interest. Over time, your equity—your ownership stake in the home—increases.

Closing costs include fees tied to finalizing your loan, such as appraisal, title search, and lender fees. Planning for these costs upfront helps ensure a smooth and stress-free closing experience.