Mortgage Loan Information for Beginners

Understanding the Basics of Mortgages and Real Estate Financing




What is a mortgage?

A mortgage is a promise to the bank to reimburse the funds they paid for you to get your new home.  The bank charges interest on the money.  The time frame to pay the funds back vary on the type of loan you choose.  A typical home mortgage is 30 years (360 monthly payments). The best way to determine what loan is best for you is to consult with a licensed, professional mortgage loan  officer who will help determine the best loan type for you.  Also, before you start looking at houses, it is best to see how much you pre-qualify for so you can know your price range.

Reasons for Pre-Qualification

  • You will know the exact amount you can spend on a house, saving you countless time and potential disappointment.
  • Once you know how much you are spending, you can start to figure your monthly payment into your budget.
  • Your closing costs and down payment figures are determined during the pre-qualification.
  • After you know what you qualify for, you and your loan officer can select the best loan program for you.
  • Getting pre-qualified can help determine if you might qualify for a special loan package, like Down Payment Assistance Programs, V.A. loans, First Time Home Buyer Program, and many other available options.

Shop around for your Loan

Much like shopping around to find the right house, it is important to shop around to find the right mortgage. This will help you get the best interest rate so you save money. There are different loan programs for different financial situations and credit scores.

Things to think about:

How long you plan to keep the loan? If you plan to sell the house in less than 5 years, maybe an adjustable or a balloon type mortgage would be the best choice.

How much can you afford to pay each month?

Moving Expenses



Buyers that use a down payment assistance program.

Things to avoid:

  1. AVOID changing jobs in a purchase. Changing jobs before or during the loan process can create real problems, especially if you change to a different line of work or if you get a lower rate of pay.
  2. AVOID moving money around. Leave everything as is until your loan is closed because it is difficult to verify funds if money is moved and this may complicate the process and possibly delay the closing.
  3. AVOID paying off your bills. Do not pay off any bills unless your loan officer has advised you to do so to help you qualify for your loan.
  4. AVOID making large purchases.  If you increase the amount of liabilities you have, this will decrease the amount of home for which you qualify.