Mortgage Basics

What is a Mortgage?

A mortgage is simply a large loan, for the purpose of buying property, that’s to be repaid over a fixed number of years – typically 30. Mortgages are secured by property: the mortgage lender has a claim to the property until the entire loan has been paid back. There are different types of mortgages, which depend on the requirements of the lender and the needs of the borrower.

Mortgage Basics

The following are key mortgage components that are good to understand before taking out a loan. UW Funding can answer any questions you have on any part of the mortgage process.

01. Approval

Different lenders and different programs have different requirements that you must meet to qualify for a mortgage. These typically include credit, income, employment, and assets – as well as certain standards for the property in question.

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02. Payments

The bulk of mortgage payments are made up of principal – the actual amount borrowed – and interest. The amount paid in interest decreases each month as the amount paid towards the principal balance increases. This is called amortization.

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03. Programs

Mortgage programs are different types of mortgages that have different qualifying requirements and different costs: down payments, insurances, and interest rates vary between them. Federally insured mortgages, such as FHA or VA loans, have more flexible qualifying guidelines.

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04. Closing Costs

When closing a mortgage, there are a number of fees to pay. These are for the services rendered to obtain the loan – like appraisals, insurances, and dues. They can be paid up-front or added to the loan (for a fee).

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05. Rates

You’ll likely have a number of interest rate options when taking out a mortgage. Interest rates change all the time and available rates different greatly from lender to lender, so make sure to do some market research of your own.

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Mortgage Basics FAQs

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