How Does a Mortgage Work?

Understanding how a mortgage works is crucial for homebuyers in Arizona’s East Valley, including areas like the East Valley. A mortgage is a loan from a lender, such as a bank, to purchase a home. You repay it over time—often 15 or 30 years—with interest, using the property as collateral. If you miss payments, the lender can foreclose.

The process starts with a down payment, typically 3.5% to 20% of the home’s price. For a $400,000 home, that’s $14,000 to $80,000. The rest is borrowed. In 2025, Arizona’s average 30-year fixed-rate mortgage sits around 6.5%. For a $320,000 loan (after a 20% down payment on $400,000), monthly payments for principal and interest might be $2,022, excluding taxes, insurance, and possibly PMI (Private Mortgage Insurance) if your down payment is under 20%.

Payments break down into principal (loan amount), interest (lender’s fee), taxes, and insurance—known as PITI. Over time, more of your payment reduces the principal, building equity. In the East Valley, where median prices are $450,000, early payments mostly cover interest. You can choose fixed-rate mortgages for steady payments or adjustable-rate mortgages (ARMs) with rates that change after an initial period.

The Anderson Team with Real Broker helps buyers and sellers in the East Valley understand these dynamics, connecting them with lenders for competitive rates. They also guide on programs like VA or USDA loans, which can lower costs for eligible buyers. A mortgage isn’t just a debt—it’s a path to ownership as home values grow in Arizona’s booming market.

FAQ: How Mortgages Work

Q: What’s included in a mortgage payment?
A: Payments cover principal, interest, taxes, and insurance (PITI), plus PMI if your down payment is under 20%.

Q: How long does a mortgage last?
A: Typically 15 or 30 years, depending on the loan term you choose.

Q: How can The Anderson Team assist?
A: We help East Valley buyers navigate mortgage options, ensuring the best fit for their budget.