Mortgages & Home Loans

A loan used to buy a home or other real estate, where the lender provides the money and the borrower repays it over a set period with interest. The home serves as collateral, so if payments stop, the lender can foreclose to recover the property. Most are repaid over 15, 20, or 30 years, with each monthly payment typically covering principal, interest, property taxes, and homeowners insurance (PITI).

A mortgage insured by the Federal Housing Administration, part of HUD, where a private lender issues the loan and the FHA insures a portion of it. That insurance reduces the lender’s risk, which is why FHA loans allow more flexible credit and down payment requirements, such as 3.5% down with a credit score of 580 or higher. They are popular with first-time buyers and those rebuilding credit, but require mortgage insurance premiums (MIP).

A home loan offered by a private lender such as a bank or credit union that isn’t backed or insured by a government agency, unlike FHA, VA, or USDA loans. It typically has stricter requirements, often a minimum credit score of 620 and a down payment starting around 3% to 5%, with a 20% down payment needed to avoid private mortgage insurance. It comes in conforming loans (meeting Fannie Mae and Freddie Mac guidelines) and non-conforming jumbo loans.

A home loan whose interest rate is fixed for an initial period (usually 3, 5, 7, or 10 years) and then adjusts periodically based on market conditions, calculated as an index rate plus a lender’s margin. The initial rate is typically lower than a fixed-rate mortgage, but payments become uncertain once adjustments begin. Caps limit how much the rate can rise per period and over the life of the loan.

A home loan with an interest rate that stays the same for the entire loan term, so the rate you agree to at the start doesn’t change with market movements. Your principal and interest payment stays consistent month to month, which makes budgeting easier and protects you from rising rates. It is commonly offered in 15-, 20-, and 30-year terms, unlike an adjustable-rate mortgage whose rate can change after an initial period.

An insurance policy required on conventional mortgages when you put down less than 20% of a home’s price, or refinance with less than 20% equity. You pay for it, but it protects the lender rather than you, helping them recover part of the loan if a borrower defaults. It typically costs between 0.3% and 2% of the loan amount per year and can be removed once your loan balance reaches about 80% of the home’s original value.

The process of replacing your current mortgage with a new loan, usually with different terms, to improve your financial situation. Common goals include lowering your interest rate, shortening your loan term, switching between fixed and adjustable rates, or tapping home equity through a cash-out refinance. The new loan pays off the existing one, though closing costs should be weighed against the potential savings.