The American dream is the belief that, through hard work, courage, and determination, each individual can achieve financial prosperity. Most people interpret this to mean a successful career, upward mobility, and owning a home, a car, and a family with 2.5 children and a dog.

The core of this dream is based on owning a home. Since your house is likely to be the largest financial obligation you'll ever have, mortgages were created to assist you in paying for it. A mortgage loan is simply a long-term loan given by a bank or other lending institution that is secured by a specific piece of real estate. If you fail to make timely payments, the lender can repossess the property.

Because houses tend to be expensive - as are the loans to pay for them - banks allow you to repay them over extended periods of time, known as the "term". Terms can range anywhere from between 10 to 30 years. Shorter terms may have lower interest rates than their comparable long-term brothers. However, longer-term loans may offer the advantage of having lower monthly payments, because you're taking more time to pay off the debt.

In the old days, a nearby savings and loan might lend you money to purchase your home if it had enough cash lying around from its deposits. Nowadays, the money for home loans primarily comes from three major institutions: The Federal National Mortgage Association, known as Fannie Mae; the Federal Home Loan Mortgage Corporation (known as Freddie Mac); and the Government National Mortgage Association (known as Ginnie Mae). The bank that holds your loan is responsible primarily for "servicing" it.

When you have a mortgage loan, your monthly payment will generally include the following:

  • An amount for the principal amount of the balance
  • An amount for interest owed on that balance
  • Real estate taxes
  • Homeowner's insurance

Home Mortgage interest rates come in several varieties. With a "fixed rate mortgage loan", the rate and your monthly payment remains the same for the life of the loan. With an "adjustable rate" the interest rate changes based on a specified index. As a result, your monthly payment amount will fluctuate.

Mortgage loans come in a variety of types, including conventional, non-conventional, fixed and variable-rate, home equity loans, interest-only and reverse mortgages. At, we can help make this part of your American dream as easy as apple pie.

Published on May 22, 2006