How Mortgages Work

Fil and I were talking last night, and neither of us really had a solid understanding of how mortgages work. We knew that the Federal Interest Rate was involved, we knew that Freddie Mac/Fannie Mae were involved, and obviously that banks were involved. But, how they all work together is, to say the least, confusing.

Based on what I’ve read, I’m trying to sketch out a “plain english” description of how it all works. In doing some reading, I’ve already learned at least 10 things that I thought I understood but didn’t. Please fill in the comments with corrections, but this is how I think it all kinda works (not that I’ve ever had a mortgage):

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