Mortgage 101: First Time Buyer’s Guide

Buying your first home is an important milestone—but it doesn’t come without its challenges. Financing, inspections, appraisals—these are all terms you need to learn about as you jump into this exciting process. As you search for your ideal home, there’s a steep learning curve, and the best thing you can do is prepare in advance. With that goal in mind, we’ve developed a guide to help you answer the question that most first-time home buyers grapple with: what is a mortgage and how does it work?

What Is a Mortgage?

A mortgage is a type of loan offered by financial institutions that is secured by the home you purchase. A mortgage loan helps you to buy a home. The difference between what you’ve saved, and the purchase price of the property is the mortgaged amount. For Instance, if a home is $350,000 and you have $70,000 saved as a down payment. The mortgage amount of $280,000 helps you to buy the home. The way it works is that the buyer makes a down payment—usually 20% of the selling price—and the lender covers the remainder of the cost. Under the mortgage, the buyer is then committed to paying back the loan at a rate agreed upon with the bank or credit union.

These loans span a specific time period—or term—in which the buyer has to pay back the amount paid by the financial institution. The most common term length is 30 years; however, you can also find mortgages offered in 20-, 15-, or even 10-year terms.

Under this basic structure for a conventional mortgage, there are a few variations on what a it can look like in practice:

Fixed-Rate Mortgage

Fixed-rate mortgages are named as such because they keep the same rate over the entire course of the loan, regardless of the term of the agreement. The primary benefit is that you can easily budget your monthly payments alongside your other expenses. Your payment of principal and interest is the same amount for the entire term of the loan. Fixed rate mortgages are great in the current low rate interest environment. A loan officer can discuss the payment and term options.

First Time Mortgage Program

Citadel offers its’ own First-Time Home Buyer program with as little as 3% required for a down payment. This program is excellent for those that do not have enough saved for a down payment. A Citadel Mortgage Loan Originator can discuss your options with you and help calculate how much you could afford for a home purchase.