A mortgage is a loan that can be used to purchase a home. They allow borrowers to borrow large sums of money to be paid off over several years with a low-interest rate. There are several types of conventional mortgages and can be useful for various buyers.
Using a mortgage to pay for real estate allows buyers to spread out the cost of the home purchase over many years, making the property much more affordable in the long run. However, many people still choose to put some of their own money towards their home purchase, which is known as a down payment.
Mortgages can be broken down into four terms:
- Down payment: the amount paid towards the home purchase from the buyer’s own money
- Loan term: how long borrowers have to pay back the conventional mortgage loan, typically resulting in monthly payments over several years.
- Interest rate: also known as the mortgage rate, this is the money that it will cost to borrow. Mortgage rates are expressed with a percentage of the borrowed amount. This rate will vary based on the lender.
- Secured loan: the home purchased can be used for collateral for the amount borrowed.
Mortgages are different from other loans because they are used solely for real estate, and borrowers do not handle the money themselves. Mortgage lenders pay the home seller directly. Buyers do not receive the money from the loan.
Mortgages are a great option for purchasing real estate, whether you are a first-time buyer or an experienced one. If you are looking to purchase a property soon, Monroe Funding Corp can help.