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When you buy a home, getting a loan can be really confusing because there are so many different mortgage products that lenders offer. But the truth about mortgages is that there are really just two main types. Once you understand how they work, you’ll know which one is the best type of mortgage for you.
What is a Mortgage?
Before we get into the two main types of mortgages, I should probably make sure that you know what a mortgage is. A mortgage is a loan that’s used to buy real estate that closes the gap between the purchase price and how much money you have for a down payment. For instance, if you agree to pay $200,000 for a home but only have $20,000 to put down, then you need a mortgage for the difference, or $180,000 ($200,000 - $20,000).
