The Basics of Home Loans

What is a Mortgage?

A mortgage is perhaps the most convenient route to the realization of your dream of becoming a homeowner. Mortgages are, basically, agreements between a borrower and a lender, secured by a property collateral. In home mortgage loans, the home is, therefore, that collateral.

The collateral is required in case you default on the payments. The lender has the right to foreclose your home when you miss a certain number of deadlines as stipulated in the agreement you signed.

Real estate prices are soaring these days, which makes them a good investment but quite difficult to pay for upfront. Home mortgages make it possible to avail a property with only 20%, or maybe even less, of upfront payment and the rest in debt. People with stellar credit scores and decent financial standings usually get approved for a home mortgage loan without so much trouble. Low to moderate-income families and individuals, on the other hand, can take advantage of home loan programs specially tailored for those on a tight budget.

home mortgage loan


Types of Mortgage Loans

Mortgage loans come in several types. Understanding the basic types can help you find and pick terms that will better suit your situation.

  • Fixed-rate mortgages are the most basic type of mortgage loans and the easiest to comprehend. When you apply for this loan, you’ll pay the same amount, monthly, for the entire life of the loan. Fixed-rate mortgages are fairly easy to calculate. You can even do the math yourself. Of course, the longer the term of the loan is, the higher the interest costs are going to be.
  • Adjustable-rate mortgages are more or less similar to standard loans, except for the fact that the interest rate may change in the future. When this happens, your monthly payments may either increase or decrease. It usually takes a few years for the interest rate to move, but there are set limits as to how high or low it can go. The risk of this type of loan is in the unpredictability.  How much interest you’ll pay in 10 years? You’ll never know.
  • Home Equity Loans is another type of loan, although they’re not targeted to homeownership, rather borrow against a property that is already yours by putting another mortgage on top of the one you’re currently paying for.  This type of loan is commonly used for home improvements and other emergency financial needs
  • Refinance Loans lets you swap from one mortgage to another in case you come across a better deal. The new mortgage settles the old loan with the lending institution to acquire your mortgage.  Refinancing may save you money in the long term if you get the computations right.


These days, mortgages come in both conventional and government-guaranteed forms to provide more options for aspiring homeowners. If you cannot qualify for regular loans, other alternatives such as FHA Loans, VA Loans, USDA Loans, and several others are worth checking out. If you are from Texas, then you might want to consider some home loans in Texas that can accommodate your budget.

Keep in mind that home mortgages are big financial responsibilities. When in doubt, do not hesitate to seek professional advice.


By: Karissa