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Want to buy a home? Do you have the cash in the bank? If you're like most people, you probably don't. We go to banks and mortgage lenders and borrow the money to buy our homes. What would we do if those banks and mortgage lenders weren't around to sell us the money to buy our homes? The rental market would sure be booming!

In this article, we'll explain how the secret world of mortgages makes home ownership possible for so many people. We'll look at some of those confusing terms you always hear, like "escrow" and "amortization," we'll look at all the fees you pay, and we'll find out what the costs of the loan really are. You may be surprised at what you are actually paying for that modest house in the suburbs!

What is a Mortgage?
According to Webster's, a mortgage is "the pledging of property to a creditor as security for the payment of a debt." In plain terms, it is the legal contract that says if you don't pay the loan back (along with all of the fees and interest that are included with it), then the lender can have your house.

In states following the "title theory," the lender holds the title to your house until the debt is completely paid off, and the lender will sell your house in order to get the money back if you can't make your mortgage payments. In states following the "lien theory," the mortagee holds a lien on your property and can foreclose said lien and sell your property in the event you default under the mortgage.

Your down payment is the lump sum you pay up front that reduces the amount of money you have to finance. You can put as much money down as you want, or you can sometimes pay as little as 3 to 5 percent of the purchase price. The more money you put down, though, the less you have to finance and the lower your monthly payment will be.