Definition
A loan used to purchase or refinance real estate, secured by the property itself. Typically repaid over 15 to 30 years.
In depth
A mortgage is a loan secured by real estate, where the property itself serves as collateral — if the borrower stops making payments, the lender can foreclose and sell the home to recover the outstanding loan balance. Mortgages make homeownership accessible by allowing buyers to purchase property with a fraction of the price upfront (the down payment) while repaying the balance over a multi-decade term.
The most common US mortgage is the 30-year fixed-rate, where interest rate and monthly payment remain constant for the entire term. This predictability provides budgeting stability. A 15-year fixed-rate mortgage offers a lower interest rate and dramatically less total interest paid — on a $400,000 loan, a 15-year term typically saves $150,000–$200,000 in total interest compared to 30 years, though monthly payments are substantially higher.
Adjustable-rate mortgages (ARMs) start with a lower fixed rate for an initial period (commonly 5, 7, or 10 years) before adjusting annually based on a benchmark rate plus a margin. ARMs can be advantageous for buyers who plan to sell before the fixed period ends. FHA, VA, and USDA loan programs offer government-backed options with lower down payment requirements for qualifying buyers.
Monthly mortgage payments are often described by the acronym PITI: Principal (reduces the loan balance), Interest (lender's compensation for the loan), Taxes (property taxes collected monthly into escrow), and Insurance (homeowner's insurance plus PMI if applicable). Private Mortgage Insurance (PMI) is required when the down payment is less than 20%, costing 0.5–1.5% of the loan amount annually until 20% equity is reached.
Frequently asked questions
What is the minimum down payment required to get a mortgage?
It varies by loan type. Conventional loans can require as little as 3% down with strong credit. FHA loans (government-backed) require 3.5% with a 580+ credit score. VA loans (for veterans and active service members) and USDA loans (rural and suburban areas) can require 0% down. Putting down less than 20% on a conventional loan requires paying Private Mortgage Insurance (PMI) until you reach 20% equity.
What factors determine the mortgage interest rate I qualify for?
The most important factors: credit score (a 760+ FICO score vs 640 can mean a 1–1.5% lower rate, saving hundreds per month), debt-to-income ratio (lenders prefer below 43%), loan-to-value ratio (larger down payments get better rates), loan type and term (15-year fixed rates are lower than 30-year), property type, and the broader Federal Reserve interest rate environment.
Should I get a 15-year or 30-year mortgage?
30-year mortgages offer lower required monthly payments, providing cash flow flexibility for other goals. 15-year mortgages have meaningfully lower interest rates and you pay far less total interest — often 40–50% less over the loan's life. If you can comfortably afford the higher 15-year payment, the interest savings are substantial. A practical middle-ground strategy is taking a 30-year mortgage but making additional principal payments whenever your budget allows.
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