Looking for thorough tutorial on US Mortgages

[Roy N.]

Good morning BP!

We are getting closer to that point in time where purchase of a US residential property (4-unit) will become a reality. In preparation, I am looking for a thorough, but concise tutorial on the workings of US mortgages.

The basic mechanics are not dissimilar to mortgages here in Canada, save interest is compounded differently, long mortgage "terms" are prevalent and you can deduct {in some instances?} your interest payments from your income tax.

The area where things appear to significantly diverge is around set-up and closing costs. In Canada, closing costs typically are handled external to the mortgage, but the basic costs are similar. The aspects that are non-existent here are "originating fees" {they do exist in the commercial world, but not on residential mortgages} and "discount points". Of the two, discount points makes the least sense to me. I understand "points" to be about "buying down the interest rate" over the term of the mortgage with an upfront payment ... similar to how we pay for mortgage insurance on a high-ratio mortgage upfront rather than tacking it onto the principal. However, I am not convinced it is in the mortgagors best interest, especially when you factor in the opportunity cost of capital.

I apologise for asking this ... I tried mining with Google to find my answers, but all information discovered thus far makes a certain level of assumed understanding about how a US mortgage works ... and why things are the way they are.