Master mortgage terms and concepts with our comprehensive learning center. From basic definitions to complex loan programs, we make mortgage education accessible to everyone.
Understanding these key terms will help you navigate the mortgage process with confidence
Follow these 8 essential steps to successfully purchase your home
Choose the right loan program based on your situation and qualifications
Get answers to the most common mortgage questions
Pre-qualification is a quick estimate based on basic financial information you provide (income, debts, assets). It takes minutes and gives you a ballpark loan amount.
Pre-approval involves submitting a full application with documentation (pay stubs, bank statements, tax returns) and a credit check. It provides a more accurate loan amount and shows sellers you're a serious buyer.
Pre-approval carries much more weight in competitive markets and is often required to make strong offers.
Temporary Buydowns: Seller or builder pays upfront to reduce your rate for 1-3 years. Great in high-rate environments when you expect rates to drop or income to increase.
Permanent Buydowns: You pay discount points at closing to permanently reduce your rate. Makes sense if you're staying 7+ years and have extra cash at closing.
Use our Rate Buydown Calculator to see which option saves you more money based on your specific situation!
Conventional Loans: Prefer 28% front-end (housing only) and 36% back-end (all debts) ratios.
FHA Loans: Allow up to 31% front-end and 43% back-end ratios.
Some Programs: May accept up to 50% back-end ratio with strong compensating factors like high credit score or significant assets.
Check your ratios with our DTOI Calculator to see your qualification status and get personalized recommendations!
Down payment options vary by loan type:
Conventional: 3-20% (PMI required under 20%)
FHA: 3.5% minimum with 580+ credit
VA/USDA: 0% down payment options available
Jumbo: Typically 10-20% minimum
Higher down payments mean lower monthly payments, no PMI (if 20%+), and stronger offers in competitive markets. But don't drain all your savings!
30-Year Mortgage: Lower monthly payments, more cash flow flexibility, higher total interest cost, more time to build equity.
15-Year Mortgage: Higher monthly payments, significant interest savings, faster payoff, faster equity building.
Consider your budget, other financial goals, how long you plan to stay in the home, and opportunity cost of extra payment money. Use our 15 vs 30 Year Calculator to compare!
FHA Loans: 580+ for 3.5% down, 500+ for 10% down
Conventional Loans: 620+ preferred, 640+ for best rates
VA Loans: No minimum, but most lenders prefer 620+
USDA Loans: 640+ preferred
Jumbo Loans: 700+ typically required
Higher credit scores get better interest rates and terms! Even a 20-point increase can save thousands over the loan term.
Closing costs typically range from 2-5% of the loan amount and include:
Lender Fees: Origination, underwriting, processing (~0.5-1%)
Third-Party Services: Appraisal, title, escrow (~1-2%)
Government Fees: Recording, transfer taxes (~0.5-1%)
Prepaid Items: Insurance, taxes, interest (~0.5-1%)
You can often negotiate for seller to pay some closing costs, especially in buyer's markets.
Consider refinancing when:
Rates Drop: Generally when you can reduce rate by 0.5-1%
Credit Improves: Better score may qualify you for better rates
Remove PMI: If home value increased and you have 20%+ equity
Cash-Out Needs: Access equity for home improvements or debt consolidation
Change Terms: Switch from ARM to fixed, or 30-year to 15-year
Use our Refinance Calculator to see if refinancing makes financial sense for your situation!
Now that you understand mortgage terms and processes, let's get you pre-qualified!
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