A mortgage is a legal agreement in which a bank or lender provides funds to purchase real estate while the property itself serves as collateral. If the borrower fails to repay, the lender can foreclose on the property.
Common Mortgage Types
- Fixed-rate — interest rate stays the same for the entire loan term
- Adjustable-rate (ARM) — rate changes periodically based on a benchmark index
- FHA loan — government-backed, lower down-payment requirements (3.5%)
- VA loan — available to veterans, often no down payment required
Key Mortgage Components (PITI)
A typical mortgage payment includes: Principal, Interest, property Taxes, and homeowner's Insurance.