First Time Home Buyer - What is a Mortgage?
A mortgage is a loan to an individual(s) for the purpose
of buying a residence. A home
equity loan is different.
Mortgage loans are considered a financial “product”
because each mortgage lender can design their own mortgage
program (within the law) and will make a profit when someone
buys that mortgage product.
Mortgage money comes from investors that pool their money
(by way of banks, retirement funds, etc.,) in order to be
able to lend large amounts. In turn, the investors earn interest
on the money that’s loaned, producing wealth.
The person buying a mortgage agrees to pay the loan amount
(principal) as well as interest over a specific period of
time (traditionally the period has been 30 years.) With interest,
the true price of the residence can often be several times
more than the purchase price, but because the amount is paid
over a long period of time in regular installments, the buyer
can afford the total.
Only the advice of a qualified loan professional will give
you the information critical to making the right buying decision.
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