What is a First Mortgage and Why is it Important When Buying a Home?
Buying a house is one of life's biggest financial decisions. I've noticed many first-time homebuyers get confused about mortgages, especially the difference between various types of home loans. Let's clear up the mystery around first mortgages and why they're so important in real estate.
First Mortgage: A first mortgage is the primary loan secured by a property that takes precedence over any other loans or liens on that same property. In the event of a foreclosure or property sale, this mortgage must be paid off before any other loans can be satisfied, except for property taxes and certain government assessments.
The Priority Position of First Mortgages
Think of a first mortgage like having first dibs on the property. This loan sits at the top of the priority list, giving the lender strong legal rights if something goes wrong. Other loans or liens have to wait their turn - they're second in line.
But there are some exceptions to this rule. Property taxes and certain government assessments actually outrank your first mortgage. This means if you default on your loan, these items get paid before your mortgage lender sees a dime.
Key Features of First Mortgages
First mortgages typically come with better interest rates than other types of home loans. Why? The lender has first claim to the property, which makes their investment safer. Your rate will depend on:
Your credit score
Down payment amount
Loan term length
Current market rates
Property type
Most first mortgages require a down payment, though the amount varies. You might put down as little as 3% or as much as 20% or more. The bigger your down payment, the better your rate might be.
First Mortgages vs. Other Types of Home Loans
Let's compare first mortgages with other common home loans:
Second Mortgages: These loans come after your first mortgage and usually have higher rates
HELOCs: These credit lines use your home's equity and typically sit in second position
Refinance Loans: These replace your existing first mortgage with new terms
Common First Mortgage Programs
You've got options when it comes to first mortgages:
Conventional Loans: Standard mortgages not backed by government agencies
FHA Loans: Government-backed loans with lower down payment requirements
VA Loans: Zero-down-payment loans for veterans and service members
USDA Loans: Rural property loans with no down payment required
Jumbo Loans: Large loans that exceed conventional loan limits
The First Mortgage Process
Getting a first mortgage involves several steps:
Submit your application
Provide financial documents (tax returns, pay stubs, bank statements)
Go through underwriting review
Complete a home appraisal
Close on your loan
Common Misconceptions About First Mortgages
I hear these myths all the time:
"You need perfect credit for a first mortgage" (False - many programs accept lower scores)
"You must put 20% down" (False - many options require much less)
"You're stuck with your rate forever" (False - you can refinance later)
"All lenders offer the same rates" (False - rates and terms vary significantly)
Tips for Getting the Best First Mortgage
Want to score a great deal on your first mortgage? Try these tips:
Clean up your credit report months before applying
Save for a larger down payment
Compare at least three different lenders
Get pre-approved before house hunting
Keep your employment stable
Risks and Considerations
First mortgages are serious commitments. Consider these factors:
Monthly payments must be made on time
Property values can go up or down
You'll need homeowner's insurance
Maintenance costs are your responsibility
First Mortgages in Current Markets
The mortgage market shifts with economic conditions. Right now, we're seeing:
Changing interest rates
Various down payment options
New loan programs emerging
Different qualification requirements
Making Your Decision
A first mortgage is a big commitment - but it's also your ticket to homeownership. Take time to understand your options, compare different loan programs, and choose what works best for your situation.
Ready to start your home buying journey? Contact Bellhaven Real Estate. We'll connect you with trusted lenders who can help you find the perfect first mortgage for your dream home.