Mortgage Basics

Financing a home can feel overwhelming, but the basics of a mortgage are easier than they seem. Let’s break down the core concepts in under a minute.

First, loan types. The two main categories are Conventional loans and Government-Insured loans. Conventional loans are offered by private lenders and aren’t backed by the government, which means they typically require stronger credit but offer more flexibility for qualified buyers. Government-Insured loans, like FHA, V-A, or USDA, have specific eligibility rules and often lower down payment requirements.

Your choice affects your down payment, which can range from 0% to 20% or more.

Next, interest rates. A Fixed-Rate mortgage keeps the same rate and monthly payment for the entire loan term, offering long-term stability. An Adjustable-Rate Mortgage, or ARM, usually starts with a lower rate that can change over time based on market conditions.

Your monthly payment is made up of three key parts. Principal, which reduces your loan balance; Interest, the cost of borrowing; and often Taxes and Insurance, which are collected and managed through escrow.

Understanding these fundamentals puts you in control. It’s the first step toward turning homeownership into a goal you can actually feel good about.