How does a mortgage work

1. Borrowing Money - A lender provides funds to buy a home, and the borrower agrees to repay over time.
2. Secured Loan - The house acts as collateral; if payments aren't made, the lender can take ownership (foreclosure).
3. Monthly Payments - Payments typically cover:
   1. Principal (amount borrowed)
   2. Interest (cost of borrowing)
   3. Taxes & Insurance (sometimes included in escrow)

Types of mortgage

1. Fixed-Rate Mortgage – Interest rate stays the same for the entire loan term (e.g., 15, 30 years).
2. Adjustable-Rate Mortgage (ARM) – Interest rate starts low but can fluctuate based on market conditions.
3. Government-Backed Loans -  FHA, VA, and USDA loans offer lower down payments and flexible qualifications.
4. Interest-Only Mortgage –  FHA, VA, and USDA loans offer lower down payments and flexible qualifications.
5. Jumbo Loans –   Used for high-value homes, exceeding standard loan limits.

Steps to getting a mortgage

1. Check Your Credit Score -- Higher scores lead to better loan terms.
2. Determine Your Budget – Use a mortgage calculator to estimate affordability.
3. Get Pre-Approved – A lender evaluates your financial situation to determine loan eligibility.
4. Find a Home – Work with a real estate agent to select a property within your budget.
5. Home Appraisal & Inspection – Ensures the home's value and condition are suitable.
6. Loan Approval & Closing – Final paperwork is signed, and ownership is transferred.

Mortgage Rates

Higher vs low

Higher Rates – Bigger monthly payments, higher borrowing costs, and less purchasing power.

Lower Rates – Smaller monthly payments, lower total loan costs, and greater home affordability.

What factors influence rates

Credit Score –  Higher scores get better rates.

Loan Type & Term –  Fixed vs. adjustable rates, and loan duration affect costs.

Down Payment – Bigger down payments can lower rates.

Market Conditions – Inflation, Federal Reserve policies, and economic trends impact rates.