Unpacking Boxes And Hugging

What Is A Mortgage? Understanding the Basics

Learn more about the mortgage lending process and what you need to know.

If you’re considering taking out a mortgage, the process can seem daunting. There are different types of mortgages, and deciding which one is best for your situation can be difficult. Have no fear, though. We’re here to help. We’ll walk you through the basics and what you need to know to get your first mortgage.

What is a Mortgage?

A mortgage is essentially a loan that a person uses to purchase a home or other real estate. For a mortgage, the property serves as collateral. This means that if you cannot pay the mortgage back for whatever reason, your house will be seized by the bank or financial institution that you owe money to.

Key Mortgage Loan Terms to Know

Annual Percentage Rate (APR): APR is a percentage that defines the total cost of borrowing. This includes the interest rate but also any additional fees.

Down Payment: Down payment is the amount of money you pay upfront for your mortgage. Down payments on homes can range from 0% in some rare cases to a more typical 20% or more.

Pre-approval: Pre-approval is essentially a document that describes a particular loan you can get approved for. When you find a mortgage you are interested in, you can apply for pre-approval, which will tell you how much you qualify for and at what APR.

Principal: Principal is the money you borrow. In other words, it is the amount the loan is for.

Term: A mortgage term is the length of your home loan in years. You continue to make mortgage payments on your home for the full length of the term.

Title: A title is a document that provides proof that you own a home. It usually also contains information that describes the home and who owns it.

Closing Costs: These are the costs associated with processing the purchase of your home. They include any fees paid to process the mortgage, fees to have the home appraised, and inspection fees.

Different Types of Mortgages

There are multiple different types of mortgages, and they can be good in different scenarios.

Primary Mortgages vs. Refinancing Mortgages

First, there are primary mortgages and refinancing mortgages. Primary mortgages are the first mortgage taken out for a particular property.

Refinancing mortgages are those which are used to replace an original mortgage when you think that you can save money by obtaining a lower APR, a shorter term, or lower monthly payments.

Fixed-Rate Mortgages vs. Adjustable-Rate Mortgages

Regardless of whether this is your primary mortgage or you are trying to refinance, there are two primary rate structures that you may encounter: fixed-rate mortgages and adjustable-rate mortgages.

Fixed-rate mortgages are exactly what their name describes. The rate that you take out the mortgage for will remain fixed for the remainder of the mortgage term unless you choose to refinance. Fixed-rate mortgages can be excellent when your APR is great at the time that you are purchasing a home. You may thus want to lock this excellent APR in for the life of the mortgage.

Adjustable-rate mortgages are also known as variable-rate mortgages. These are mortgages where the APR that you pay may change over time.

Typically, the rate is fixed for a period of time at the beginning of the term, after which it will fluctuate within some limit according to the U.S. Prime Rate. The period where it is locked in is usually around five years. Adjustable-rate mortgages sometimes have advantages like lower starting APR.

In addition, if interest rates drop, your adjustable-rate mortgage’s APR will also decrease without you having to refinance it. Just remember that if interest rates rise, your APR will as well.

Lot & Construction Loans

In addition to mortgages to pay for a home you are purchasing, you can also find loans that are available to purchase lots or finance construction. After the home is built, this loan will convert to a standard mortgage.

Other Mortgage Loan Programs

In certain cases, you may qualify for specific loan programs which are backed by the government. If you and the lender meet certain criteria, these loan programs can help you purchase a home.

Federal Housing Authority Loans: These loans are backed by the Federal Housing Administration. They are typically reserved for homebuyers who have lower credit scores and may not be able to afford a home on their own.

Veterans Affairs Loans: These are loans that are backed by the U.S. Department of Veterans Affairs. They are reserved for service members and veterans.

Additional First-Time Homebuyer Loans: Depending on where you live and your particular situation, there may be additional programs that you qualify for. You can talk with a Member Advocate or loan officer at Listerhill to find out more.

Learning More About Your Options as a First-Time Homebuyer

Being a first-time homebuyer can be stressful, but it also comes with some advantages and special programs that you can access.

For a limited time, get no PMI* in addition to low rates and local service for your home loan. Learn more here.

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Frequently Asked Questions

  • How can I access my Listerhill accounts without a nearby branch?

    If you live in Alabama or in south central Tennessee but don't have a Listerhill branch location nearby, there are still plenty of ways to access your accounts. You can use our online banking, mobile banking app, and cards app to access your accounts from your devices. You can also take advantage of our CO-OP Shared Branches for easy access to your money wherever you are. If you need to get in touch, we're always one call away.

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  • The Great Giveback Official Rules

    1. Eligibility: No purchase or obligation necessary to participate and win. All participants must be 19 years of age or older at time of contest participation. Employees of Listerhill Credit Union are not eligible to register for the contest.

    2. How To Enter the Contest: All Listerhill members who have consumer loans in good standing, (subject to limitations below) are automatically entered. Anyone who takes out a new loan with Listerhill Credit Union, or refinances a loan from another lender with Listerhill Credit Union (subject to limitations below) will automatically be entered to win. Limit of one entry per loan.

    NO PURCHASE NECESSARY: To enter the contest without a loan, send a self-addressed, stamped envelope to: Listerhill Credit Union, P.O. Box 566, Sheffield, AL 35660, Attn: Great Giveback Contest Entry. Limit one entry per person. Written entries must be received no later than July 3, 2021.

    Listerhill Credit Union will not be responsible for incomplete, lost, late, misdirected or illegible entries or for failure to receive entries. All entries become property of Listerhill Credit Union and none will be returned. Any questions regarding the number of entries submitted shall be determined by Listerhill Credit Union in its sole discretion, and Listerhill Credit Union reserves the right to disqualify any entries by persons determined to be tampering with, violating, or abusing any aspect of the contest.

    3. Contest Entry Requirements: In the event the Credit Union, in its sole discretion, determines that any Entry contains content that does not comply with these Official Rules or does not otherwise comply with regulatory guidelines, Credit Union reserves the right to disqualify the entry.

    4. Determining the Winner: A Credit Union employee will select at random four (4) $500 winners (one per day July 12-15) and one Grand Prize Winner from all entries received on July 16, 2021. You do not have to be present to win.

    5. Prizes: $500 Cash Prize: the Credit Union will award four (4) members with $500 cash each. Grand Prize: The Credit Union will pay up to $25,000 toward your loan with Listerhill Credit Union, or combination of loans. No loan payments will be made to loans with any other lender. No cash equivalent provided, and the total prize amount may be less depending on the outstanding amount of loan balance(s) with Listerhill Credit Union. In no event will the prize awarded exceed the total amount of the winner’s outstanding balance of qualifying loans with Listerhill Credit Union. Federal, state and local taxes are the sole responsibility of the winner. IRS regulations require the Credit Union file a 1099 on behalf of the winner.

    A Credit Union employee will call the prize winners and the prize winners will be called up to five times during regular business hours at number provided on entry form and will leave no messages. Failure to reach winner during these calls may result in disqualification of winner, forfeiture of his or her interest in all prizes, and selection of a substitute winner drawn from the drum. Winner will be required to schedule a time, at least 48 hours in advance, to visit Listerhill Credit Union, located at 4790 2nd Street, Muscle Shoals AL, 35661 in person, during regular business hours within seven (7) days of being notified to claim prizes by providing proof of eligibility for prize won and completing and signing an affidavit of eligibility and a liability and publicity release. Failure of any Winner to timely contact the Credit Union, visit the above Credit Union office in person and sign and return any required affidavit and release, or to claim a prize or comply with any term or condition of these Official Rules, will result in drawing Winner's disqualification and the forfeiture of his or her interest in the prize. Winners may waive their right to receive prizes. Prizes are non-assignable and nontransferable. No substitutions allowed by winner.

    6. To be eligible to win, all loans must be in good standing (not more than 30 days past due at the time of drawing. Eligible loans are limited to auto loans (no indirect dealer loans), personal loans (no loans secured by real property, such as mortgages, 2nd mortgages, and Home Equity Lines of Credit) and recreation loans made to consumer borrowers (not business or commercial loans).

    6. Participation. By participating, entrants agree to be bound by these Official Rules and the decisions of the Contest. Except where prohibited, acceptance of any prize constitutes winner's consent to the publication of his or her name, biographical information and likeness in any media for any commercial or promotional purpose, without limitation the Internet, or further compensation. Prizes not won and claimed by eligible winners in accordance with these Official Rules will not be awarded and will remain the property of the Credit Union.

  • How do I redeem my Merchandise Rewards?

    The easiest way to redeem your Merchandise Rewards is to log into Listerhill’s Online Banking and click the “Get Info” link to the right of your credit card information. This will take you to our credit card servicing site within the same window. Select “Rewards” on the upper right side within the screen (below FICO Score) and on the next screen, click on the CURewards logo. This will automatically sign you in to be able to redeem your Merchandise Rewards points!