What is a mortgage?

A mortgage is a loan specifically used to purchase or refinance a home. Instead of paying the full property price upfront, you borrow money from a lender and repay it over a set period (typically 15-30 years) through regular payments, which include principal and interest, until the loan is fully paid off.

How do I get a mortgage?

You can apply for a mortgage through a bank, credit union, or mortgage lender. The process starts with pre-qualification (an estimate based on basic financial info) or a full application when you're ready to buy. Lenders evaluate your credit score, credit history, income, and employment to determine eligibility and loan terms.

How much mortgage can I afford?

The amount you can afford depends on your income, monthly expenses, credit history, and existing debt. A common guideline is that your mortgage payment (including taxes and insurance) should not exceed 28–36% of your gross monthly income. Online calculators or a lender's pre-qualification can help you estimate this.

What is mortgage insurance?

Mortgage insurance protects the lender if you fail to make payments or default on the loan. Private mortgage insurance (PMI) is typically required for conventional loans with less than 20% down payment, reducing the lender's risk. It's an additional cost to you, usually added to your monthly payment.

What are mortgage points?

Mortgage points are upfront fees paid to the lender to lower your interest rate. There are two types: "discount points" (reduce your rate for a fee, lowering long-term interest costs) and "origination points" (cover lender processing fees). One point equals 1% of the loan amount—e.g., $2,000 on a $200,000 loan.

How do I calculate a mortgage payment?

What is a jumbo mortgage/loan?

A jumbo loan exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA)—e.g., $766,550 for most U.S. areas in 2025 (limits vary by location). These loans finance luxury homes or properties in high-cost markets and often require higher credit scores and down payments.

How can I pay off my mortgage faster?

What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), designed to help first-time or lower-income buyers. It offers lower down payments (as low as 3.5%) and more flexible credit requirements, though it requires mortgage insurance premiums (MIP) for the life of the loan in many cases.

What is a home equity loan?

A home equity loan lets you borrow against the equity in your home (the portion you own outright). It's a lump-sum loan with a fixed interest rate, repaid over a set term, and the home serves as collateral. The loan amount depends on your home's appraised value and existing mortgage balance.

What is a conventional loan/mortgage?

A conventional loan is a mortgage not insured or guaranteed by a government agency (like the FHA or VA). Offered by private lenders, it typically requires a higher credit score and down payment (often 5–20%) but avoids government-backed insurance fees, making it a popular choice for qualified borrowers.

What is the difference between fixed-rate and adjustable-rate mortgages (ARM)?

A fixed-rate mortgage has an interest rate that stays the same throughout the loan term, offering predictable payments. An adjustable-rate mortgage (ARM) starts with a lower rate that can change periodically based on market conditions, potentially raising or lowering your payments after an initial fixed period (e.g., 5 years).

What is refinancing, and when should I consider it?

Refinancing replaces your current mortgage with a new one, often to secure a lower interest rate, reduce monthly payments, or shorten the loan term. Consider it when rates drop significantly, your credit improves, or you need to access equity—though closing costs should be weighed against savings.

What are closing costs, and how much should I expect to pay?

Closing costs are fees paid at the end of the home-buying process, covering appraisals, title insurance, lender fees, and more. They typically range from 2–5% of the loan amount (e.g., $4,000–$10,000 on a $200,000 loan). Ask your lender for a Loan Estimate to see specifics.

Home Price

The home price is the total cost of a property a buyer intends to purchase. It varies based on factors like location, home size, lot size, condition, and upgrades, as well as real estate market trends. The home price directly influences the mortgage loan amount and the required down payment.

Down Payment

A down payment is the initial lump-sum cash payment made toward the home price, expressed as a percentage of the total value. While 20% is standard for conventional loans, some programs allow lower amounts—e.g., 3.5% for FHA loans or 0% for VA loans—depending on the loan type and buyer's financial situation.

Interest Rate

The interest rate (or mortgage rate) is the percentage charged by the lender on the borrowed amount. It can be fixed (unchanging over the loan term) or adjustable (varying with market conditions). Rates depend on the buyer's credit score, market trends, and loan type. Refinancing can secure a lower rate if market conditions improve.

Loan Term

The loan term is the duration (in years) over which you repay your mortgage, typically 15, 20, or 30 years. It can shift if you refinance, make extra payments, or pay more than the minimum monthly amount. The term affects both your monthly payment and total interest paid, with shorter terms offering lower rates but higher payments.

Property Taxes

Property taxes are annual fees paid by homeowners to local governments to fund public services like schools, roads, and emergency services. They're based on the assessed value of the property (home plus land) and vary by location. Lenders often collect these monthly with your mortgage payment and hold them in escrow.

Home Insurance

Home insurance (or homeowners insurance) protects against financial losses from damage to your home, its contents (e.g., furniture), or liability for accidents on the property. It covers interior and exterior damage from events like fire or storms but differs from private mortgage insurance (PMI), which protects the lender, not you.

HOA Fees

Homeowners Association (HOA) fees are monthly charges paid by residents in communities like condos, townhouses, or certain neighborhoods. They fund maintenance of shared spaces (e.g., pools, landscaping) and may cover utilities or emergency reserves for major repairs, like a new roof. Fees vary widely by property and HOA rules.

PMI (Private Mortgage Insurance)

PMI is required for conventional loans when the down payment is less than 20%, increasing the loan-to-value (LTV) ratio above 80%. It's a monthly fee (typically 0.5-1% of the loan amount annually) that protects the lender if you default. PMI can be removed once you reach 20% equity in the home.

LTV (Loan-to-Value)

Loan-to-value (LTV) is a ratio comparing the mortgage amount to the appraised home value (e.g., $200,000 loan ÷ $250,000 value = 80% LTV). Lenders use LTV to assess risk: higher LTVs (lower down payments) may lead to higher interest rates or PMI, while lower LTVs signal less risk and better terms.

Principal

The principal is the original loan amount borrowed, excluding interest, taxes, or insurance. It's the base sum you repay over time. Early in the loan term, payments primarily reduce interest rather than principal due to amortization, but extra payments can lower the principal faster.

Interest

Interest is the cost of borrowing, calculated as a percentage of the principal. It compounds over time, so early mortgage payments mostly cover interest rather than reducing the principal. Making additional payments can shrink the interest accrued and shorten the loan term.

PITI

PITI stands for Principal, Interest, Taxes, and Insurance—the four main components of a typical monthly mortgage payment. Lenders use PITI to evaluate affordability; if it exceeds 28-36% of your gross monthly income, you may be deemed a higher credit risk, affecting loan approval.

Escrow

Escrow is an account managed by your lender to collect and pay property taxes and home insurance on your behalf. A portion of your monthly mortgage payment goes into escrow, ensuring these bills are paid on time. It's common with conventional and FHA loans.

Amortization

Amortization is the process of gradually paying off your mortgage through scheduled payments. Each payment splits between interest and principal, with the interest portion decreasing and the principal portion increasing over time, fully repaying the loan by the term's end.

Equity

Equity is the portion of your home's value you own outright, calculated as the current market value minus your remaining mortgage balance. It grows as you pay down the loan or if the home's value rises, and it can be tapped via a home equity loan or line of credit.