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Your Monthly Payment
$2,130
Total paid over 30 years: $766,800
Principal & Interest
$1,773
Property Taxes
$300
Home Insurance
$100
PMI
$0
HOA Fees
$0
What is a Mortgage?
A mortgage is a loan used to buy real estate. Instead of paying the full price upfront, you borrow from a lender (usually a bank or credit union) and repay over time with interest. The property itself serves as collateral — if you don’t pay, the lender can foreclose (take back the home).
Common Types of Mortgages in the U.S.
| Type | Typical Term | Interest Rate | Best For |
|---|---|---|---|
| Fixed-Rate Mortgage | 15 or 30 years | Stays the same | Stability, long-term planning |
| Adjustable-Rate Mortgage (ARM) | 5/1, 7/1, 10/1 | Starts low, adjusts later | Short-term ownership, lower initial payments |
| FHA Loan | 15–30 years | Competitive | First-time buyers, lower credit scores |
| VA Loan | 15–30 years | Often no down payment | Veterans & active-duty military |
| Jumbo Loan | Varies | Higher | Expensive homes above conforming loan limits |
Key Mortgage Components
- Principal: The amount borrowed.
- Interest: The cost of borrowing, set as a percentage (APR).
- Taxes & Insurance: Often included in monthly payments (escrow).
- Term: The length of repayment (commonly 30 years).
- Down Payment: Typically 3%–20% of the home price upfront.
The U.S. Mortgage Ecosystem
- Government-Sponsored Enterprises (GSEs):
- Fannie Mae and Freddie Mac buy mortgages from lenders, creating liquidity in the market.
- Ginnie Mae guarantees government-backed loans (FHA, VA, USDA).
- Private Lenders: Banks, credit unions, mortgage companies.
- Regulation: Federal Reserve policies and Treasury yields influence mortgage rates.
Example: 30-Year Fixed Mortgage
- Home price: $300,000
- Down payment: $60,000 (20%)
- Loan amount: $240,000
- Interest rate: 6% fixed
- Monthly principal & interest: ≈ $1,439 (excluding taxes/insurance)
Pros & Cons
Pros
- Enables homeownership without full upfront cost
- Builds equity over time
- Fixed-rate loans provide predictability
Cons
- Long-term debt commitment
- Interest can double the cost of the home over decades
- Risk of foreclosure if payments are missed