Mortgage Basics
The essential terms and steps of getting a home loan.
Mortgage
The largest loan most Americans ever take on, explained step by step.
Explore mortgage topics
Mortgage Rates
Understand what moves rates and how to secure a better one.
First-Time Home Buyers
Everything to prepare before buying your first home.
Refinancing
Replace your mortgage with a better one — when the numbers work.
Home Equity
Understand and tap the value you’ve built in your home — carefully.
Understanding your biggest loan
For most Americans, a mortgage is the largest and longest financial commitment they will ever make. Small differences matter enormously: on a 30-year loan, a rate just half a percentage point lower can save tens of thousands of dollars over the life of the loan. Understanding how mortgages work — before you talk to a lender — puts you in a much stronger position.
This hub covers mortgage basics, how mortgage rates are set, guidance for first-time home buyers, when refinancing makes sense and how to use home equity.
The main types of mortgages
| Loan type | Minimum down payment | Who it suits |
|---|---|---|
| Conventional (conforming) | As low as 3% with certain programs | Borrowers with good credit; PMI required under 20% down |
| FHA | 3.5% with a 580+ credit score | Buyers with lower scores or small down payments |
| VA | 0% for eligible borrowers | Eligible service members, veterans and some surviving spouses |
| USDA | 0% for eligible borrowers | Moderate-income buyers in eligible rural and suburban areas |
| Jumbo | Varies by lender | Loans above the conforming limit |
Each type also comes as a fixed-rate loan, where the rate never changes, or an adjustable-rate mortgage (ARM), where the rate is fixed for an initial period and then adjusts periodically.
What goes into the monthly payment
Your payment typically includes principal and interest, plus property taxes and homeowners insurance collected into an escrow account, and mortgage insurance if your down payment is small. Use the mortgage calculator to see each piece, and read how mortgage payments work for a full explanation of amortization and escrow.
How much home you can afford
Lenders look at your debt-to-income ratio, credit, down payment and cash reserves. A traditional guideline keeps housing costs near 28% of gross income and total debts near 36%. The home affordability calculator turns your income into a price range, and our guide how much house can I afford? explains the ratios and the costs beyond the mortgage.
Shopping for a mortgage
The Consumer Financial Protection Bureau encourages borrowers to get Loan Estimates from several lenders. Because every lender must use the same standardized form, you can compare rates, points and closing costs line by line. Multiple mortgage inquiries within a short shopping window are generally treated as a single inquiry for credit scoring purposes, so comparing offers should not significantly hurt your score. The CFPB’s Owning a Home resource walks through the entire process.
Home equity and refinancing
As you pay down your loan and your home appreciates, you build equity. You can tap it with a home equity loan, a HELOC or a cash-out refinance — each with different costs and risks. Compare them in HELOC vs. home equity loan and estimate your borrowing power with the home equity calculator.
Frequently asked questions
How much do I need for a down payment?
It depends on the loan. Some conventional programs accept 3% down, FHA loans generally require 3.5% with a credit score of at least 580, and VA and USDA loans can require no down payment for eligible borrowers. Putting down 20% on a conventional loan avoids private mortgage insurance.
What is included in a mortgage payment?
Usually principal, interest, property taxes and homeowners insurance (PITI), plus mortgage insurance if required. HOA dues are typically paid separately but should be included in your housing budget.
Where can I find current average mortgage rates?
Freddie Mac publishes a weekly Primary Mortgage Market Survey of average 30-year and 15-year fixed rates. The rate you are offered depends on your credit, down payment, loan type and the lender, so get Loan Estimates from several lenders.
What is a Loan Estimate?
A standardized three-page form lenders must give you within three business days of a mortgage application. It shows the rate, monthly payment and closing costs so you can compare offers side by side.
This hub is part of our complete personal finance guide. Read our editorial standards.
Mortgage guides
All guides →How Mortgage Payments Work: Principal, Interest, Escrow and PMI
How mortgage payments work: principal and interest, amortization, escrow for taxes and insurance, PMI and how extra payments shorten your loan — with examples.
Updated
How Much House Can I Afford? Ratios, Down Payments and Hidden Costs
How much house you can afford based on income, debts and down payment: the 28/36 rule, debt-to-income ratios, closing costs and hidden ownership costs.
Updated
First-Time Home Buyer Guide: How to Buy Your First Home Step by Step
A step-by-step first-time home buyer guide: prepare credit and savings, compare loans and assistance programs, get preapproved, make an offer and close.
Updated
HELOC vs. Home Equity Loan: Which Is Right for You?
HELOC vs. home equity loan compared: how each works, fixed vs. variable rates, draw and repayment periods, costs, tax rules and which fits your borrowing needs.
Updated
Mortgage calculators
All calculators →Mortgage Calculator
Estimate a full monthly house payment, including taxes, insurance, PMI and HOA dues.
Home Affordability Calculator
Find a home price that fits your income and debts using lender-style ratios.
Home Equity Calculator
See how much equity you have and how much a lender may let you borrow.