What Is a Mortgage in Real Estate?
A mortgage in real estate is a loan used to purchase property, where the home itself serves as collateral. The borrower agrees to repay the lender through scheduled payments of principal and interest, typically over 15 to 30 years.
🏠How a Mortgage Works
- Borrower applies: The buyer applies for a loan from a bank or mortgage lender.
- Loan approval: Approval depends on income, credit score, and debt-to-income ratio.
- Down payment: The buyer provides part of the purchase price upfront, usually 3–20%.
- Repayment: Monthly payments cover principal, interest, taxes, and insurance (PITI).
Until the loan is paid off, the lender holds a lien on the property, giving them the right to foreclose if payments stop.
đź’ˇ Common Types of Mortgages
- Conventional Loan: Not insured by the government; requires strong credit.
- FHA Loan: Backed by the Federal Housing Administration — ideal for first-time buyers.
- VA Loan: Available to veterans and active military; often requires no down payment.
- USDA Loan: Designed for rural buyers; offers low or zero down payment options.
- Assumable Mortgage: Lets a buyer take over the seller’s existing loan and rate.
đź“Ť Mortgages and FSBO Sellers
For FSBO sellers, understanding the buyer’s mortgage process helps avoid delays. If you list your property on the MLS through Brokerless, you’ll reach pre-qualified buyers and agents who already have financing arranged.
🧩 Related Mortgage Terms
- Financing Contingency — protects buyers if mortgage approval falls through.
- Loan Commitment — a lender’s written promise to fund the loan once conditions are met.
- Appraisal Contingency — ensures the property app