What Is A Mortgage? The Buyer’s Guide To The Basics of Home Financing
Perhaps you’ve heard that there are no stupid questions, but there are still some that you probably feel you should know the answer to by now, and you might not feel that comfortable asking someone. Well, what is the internet for if not to answer exactly those questions? If you’ve been wondering what a mortgage is and you aren’t sure who you can ask, we’re going to walk you through the basics.
First: A mortgage is a type of loan you can use to purchase a home. It’s different from other loan products because it’s secured by the property itself. Being secured by the property means if the borrower violates the terms of the mortgage, the lender can claim the house back.
Who uses a mortgage?
Most homebuyers in the United States use a mortgage because few home purchasers have all the cash in hand they’ll need for home purchasing. A home is the biggest purchase most Americans will make in their lifetime. The median sales price of a residential property was $412,300 in the second quarter of 2024, while the median household income was $74,580, and the median savings account in the United States had a balance of $8,000.
So it’s not a surprise that 80% of recent buyers financed their home purchase with a mortgage, according to the National Association of Realtors’ 2023 Profile of Home Buyers and Sellers. The average mortgage down payment is 19% of the purchase price, but for first-time homebuyers the average is more like 8%.
