Mortgages and Loans

A mortgage is a type of loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay back the loan over a set period, typically 15 to 30 years, along with interest.

Common types include fixed-rate mortgages (with a fixed interest rate over the life of the loan), adjustable-rate mortgages (with interest rates that change over time), and government-insured loans like FHA, VA, and USDA loans.

Qualification depends on factors like credit score, income, debt-to-income ratio, employment history, and the size of the down payment. Lenders use these to assess your ability to repay the loan.

Loan amortization is the process of paying off a debt over time through regular payments. An amortization schedule shows each payment's contribution to principal and interest.

A down payment is an initial upfront portion of the total amount due. It's typically expressed as a percentage of the purchase price. A larger down payment can result in more favorable loan terms.

Refinancing a loan involves replacing an existing loan with a new one, usually to reduce interest rates, lower monthly payments, or change the loan term. It can also be used to consolidate debt.

Points, or discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point typically costs 1% of the loan amount and reduces the rate by about 0.25%.

A home equity loan, also known as a second mortgage, allows homeowners to borrow money against the equity in their home. It's typically used for large expenses like home renovations or consolidating high-interest debt.

Pre-approval is a lender's conditional agreement to lend you a specific amount based on your financial and credit information. It gives you an idea of what you can afford and shows sellers that you're serious about buying.

Defaulting on a mortgage can lead to foreclosure, where the lender takes possession of the home. It can severely impact your credit score and ability to obtain future loans.