What Is a Mortgage and How Does It Work?

If you’re thinking about buying a home, you’ve probably heard the word “mortgage” thrown around a lot. But what exactly is a mortgage, and how does it work?

At Rapid Home Loan, we’re here to break it down in simple terms—no confusing jargon, just the facts you need to feel confident as a homebuyer.

What Is a Mortgage?

A mortgage is a loan used to purchase a home or other real estate. Because most people don’t have hundreds of thousands of dollars lying around, they borrow money from a lender (like a bank or mortgage broker) to buy a property. In return, they agree to pay that money back—plus interest—over time.

The key thing to understand is that the property itself serves as collateral for the loan. If you don’t keep up with the payments, the lender has the right to take back the property through a legal process called foreclosure.

How Does a Mortgage Work?

Let’s say you want to buy a home that costs $300,000, and you have $60,000 saved for a down payment. You’ll need to borrow the remaining $240,000—that’s your mortgage.

Here’s how the process works in five simple steps:

1. Apply and Get Pre-Approved

Before house hunting, it’s smart to get pre-approved. At Rapid Home Loan, we help you determine how much you can borrow based on your income, credit score, and debt. Pre-approval also shows sellers you’re a serious buyer.

2. Choose a Mortgage Type

There are different types of loans:

Fixed-rate (same interest rate for the life of the loan)
Adjustable-rate (starts low, can change over time)
Government-backed loans like FHA, VA, and USDA

We’ll help you compare options to find the best fit.

3. Lock in Your Interest Rate

Once you’ve found a home and made an offer, we’ll help you lock in your interest rate, which affects your monthly payment.

4. Close the Loan

During closing, you’ll sign paperwork, pay any closing costs, and officially take ownership of the home. Congrats—you’re now a homeowner!

5. Make Monthly Payments

Your monthly mortgage payment typically includes:

Principal (the amount you borrowed)
Interest (the cost of borrowing money)
Taxes and insurance
PMI (Private Mortgage Insurance, if applicable)

Why Work With Rapid Home Loan?

At Rapid Home Loan, we’re more than just mortgage brokers—we’re your partners in the home buying journey. We take time to understand your goals, answer your questions, and guide you through the entire process with honesty and clarity.

Whether you’re a first-time buyer or looking to refinance, we’ll help you get the right loan with competitive rates and no stress.