A first mortgage is a type of loan used to purchase a property or to refinance an existing mortgage on a property. In the case of a purchase, the first mortgage is typically used to finance the majority of the purchase price and is usually the primary loan used to buy a home. In the case of a refinance, the first mortgage is used to pay off any existing mortgages on the property and provide the borrower with a new mortgage with new terms and interest rates.
The first mortgage is called "first" because it takes priority over any other mortgages or liens on the property, which means that if the borrower defaults on the loan and the property go into foreclosure, the lender who holds the first mortgage is first in line to be paid from the proceeds of the sale of the foreclosed property.
Typically, first mortgages have a lower interest rate than second mortgages or home equity lines of credit (HELOCs) because the lender is taking on less risk by having priority in payment.
In addition, first mortgages also have terms and conditions and require certain qualifications, like minimum credit score, debt-to-income ratio, and down payment requirement, as well as property qualifications, like property inspection and appraisals, to ensure that the property serves as collateral for the loan.
Overall, a first mortgage is a significant financial commitment and it's important for the borrower to understand the terms, conditions, and costs of the loan before committing.