A mortgage is a loan used to buy or refinance a home, where the home itself secures the loan. You borrow the difference between the price and your down payment, then repay it with interest in monthly payments over a set term, usually 15 or 30 years. If the loan isn't repaid, the lender can take the home through foreclosure. In California, the document that secures the loan is technically called a deed of trust, but everyone still calls it a mortgage.
How a Mortgage Works
Say you buy a $380,000 home with 5% down. You pay $19,000 at closing and borrow $361,000. The lender pays the seller, and you agree to repay the $361,000 plus interest over 30 years. Early payments are mostly interest; as the balance falls, more of each payment goes to principal. That schedule is called amortization. With a fixed-rate mortgage, your principal and interest payment never changes. With an adjustable-rate mortgage (ARM), the rate is fixed for a few years, then adjusts with the market.
What's in a Monthly Mortgage Payment
Lenders summarize your payment as PITI: principal (paying down what you borrowed), interest (the cost of borrowing), taxes (property taxes, often collected monthly and held in an escrow or impound account), and insurance (homeowners insurance, also usually escrowed). If you put less than 20% down on a conventional loan, add private mortgage insurance (PMI); FHA loans have their own mortgage insurance premium. If the home is in an HOA, those dues count toward what you qualify for too.
In Kern County, property taxes run about 1.25% of the purchase price a year in most areas, which adds roughly $395 a month on a $380,000 home. Try your own numbers with the mortgage payment calculator.
The Main Types of Mortgages
Conventional loans follow Fannie Mae and Freddie Mac rules, allow as little as 3% down, and let you cancel PMI later. FHA loans are government-insured, allow 3.5% down with a 580 credit score, and are more forgiving of credit issues. VA loans are for eligible veterans and service members, with no down payment and no monthly mortgage insurance. USDA loans offer zero down in eligible rural areas, which includes many towns around Bakersfield. Jumbo loans cover amounts above the conforming limit. Compare them side by side in the FHA vs. conventional comparison.
How You Get a Mortgage
Get pre-approved first: a lender verifies your income, assets, and credit and tells you how much you can borrow. Then you shop for a home, make an offer, and the lender orders an appraisal and underwrites the loan while escrow handles title and paperwork. A typical purchase closes in 30 to 45 days. You can apply with a bank, a credit union, an online lender, or a mortgage broker, who compares many lenders' rates for you. Start with pre-approval.
Most people pick a mortgage based on the lender they already bank with. That's like buying the first car on the lot. The loan program, the rate, and the fees matter far more than the logo on the building, and two lenders can quote the same borrower rates a half point apart on the same day. Before you choose, understand which program fits you and compare at least two quotes. If you're in Kern County, that's exactly what I do for you.
Have a situation like this?
Call Dan at (661) 342-9381. He will review your specific situation in a free call.