December 4, 2021

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What Is A Mortgage?

What Is A Mortgage?

What is a mortgage? To some that may sound like a totally obvious question, but for some first-time home buyers, the more information you get up front about the process of finding, buying, and owning a home the better. And that includes the most basic details of the process.

FHA mortgages are an option for the serious home buyer who wants a lower down payment than many conventional mortgages and would like to enjoy the benefits of a government-backed mortgage.

Why Do I Need A Mortgage?

This is one of the most basic questions about the home buying process. Most people will apply for a mortgage to buy a home whether that’s an FHA new purchase mortgage, A VA home loan for qualifying military members, a USDA mortgage for those living in qualifying rural areas, or a conventional mortgage.

But why?

Because most will prefer not to pay cash for the property, or cannot afford to do so. Because most people wish to avoid paying the entire purchase price of the home all at once, they instead apply for a mortgage loan from a mortgage lender to finance the cost of the home over time.

What Is A Mortgage?

A mortgage is shorthand for the home loan you apply for and use to purchase the property. The participating FHA lender, VA lender, conventional lender, etc. will offer you credit terms based on your credit score and credit history.

The loan is not simply for the asking price of the home. It will include interest payable over the lifetime of the mortgage. It may also include add-ons to the mortgage that are permitted by the lender’s rules and the rules of any program that is used to back the loan such as the FHA single family mortgage loan program or VA mortgage.

How Is The Mortgage Payment Calculated?

Your mortgage loan payment is calculated based on the length of the loan, also known as the loan term. This loan term may be available in a variety of increments depending on the lender. For FHA mortgages, 15-year loans and 30-year mortgages are standard.

The monthly mortgage payment is calculated by dividing the amount of the loan by the term of the loan, but there are other factors that determine the final monthly mortgage payment. These include any required mortgage insurance, property taxes, applicable hazard insurance, and other payments.

Borrowers who apply for a 15-year FHA mortgage will have higher monthly mortgage payments than those who apply for 30-year FHA mortgages. But the higher monthly payment on the shorter loan is offset by the amount of money saved over the duration of the mortgage.

The interest rate on a 15-year loan won’t cost a borrower as much as the interest rate over a 30-year mortgage. Simple math can show you how much you would save in the long run on a 15-year mortgage compared to the total interest paid on a 30-year loan.

There are many other aspects to FHA home loans and other mortgages. These are only a few of the basics. We will examine more about mortgages and the basics of how they work in future blog posts.

Bruce Reichstein - FHA News Author

By Bruce Reichstein

July 19, 2018

Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

5850 San Felipe Suite #500, Houston, TX 77057 281-398-6111. is privately funded and is not a government agency.

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