How does a mortgage work?

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Mortgages: Home Loans on the Web

Buying a first home is an important milestone in anyone's life. But even if it's your fifth home purchase, the financial jargon and seemingly endless paperwork involved in getting a mortgage can overshadow the excitement of owning your new home. On the Web you'll be able to find resources that help you understand what a mortgage is and how it works; decide which type of mortgage works best for you; find a reputable lender; and even understand what happens after you get your loan. For a Spanish-language version of the Guide, click here.

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How does a mortgage work?

It would be nice if getting a mortgage were as simple as asking for one and then getting a check in the mail. But lenders don't give out hundreds of thousands of dollars so easily; you'll fill out lots of financial paperwork, spend days and weeks waiting for answers, and even subject your new home to various inspections. To make sure that you don't find yourself surprised at what you're required to do to get a home loan, take a few moments to read some Web sites that explain the process to you.

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Many sites that provide mortgages also provide some sort of step-by-step review of the process. If you are unclear about the details of how your mortgage will progress, check the Web site of the lender.

To read about developments in the mortgage world, try RealEstateJournal.com, a great news source for real estate-related information and part of The Wall Street Journal.

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How mortgages work ...

Bankrate.com has a "Mortgage Basics" series that explains how a mortgage works, what paperwork you should expect to fill out, how your mortgage payments are calculated, even what can happen after you've closed on the mortgage.

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The Motley Fool has a "Finance Your Home" article with useful (and witty) explanations of the mortgage process. After reading this, you'll know the difference between using a mortgage broker and a bank for funding, and between a fixed-rate mortgage and an ARM. You'll also know where to look for a loan, and you'll understand some mortgage terminology.

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The Mortgage Professor's Web site is written by Jack M. Guttentag, a Professor of Finance Emeritus at the University of Pennsylvania. The unimpressive design of this site is balanced by the wealth of information available. Here you'll find articles to help you prepare to buy a home, tools to help you calculate what you can afford and to compare mortgages, answers to questions about buying (or building) a home, and even mistakes to avoid. If you are unfamiliar with certain mortgage topics (such as ARMs or interest-only mortgages) try taking one of the mortgage tutorials.

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For an overview of costs associated with a mortgage ...

The Federal Reserve Board has this online brochure called "A Consumer's Guide to Mortgage Settlement Costs" that explains the costs related to the mortgage as well as from the lender. This also goes over estimated costs, costs associated with transferring ownership, and has a settlement costs worksheet.

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Investopedia has a "Mortgage Basics" guide with a section on costs. Here you'll learn about the major costs incurred when getting a mortgage as well as what to expect to pay for your down payment and closing costs.

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