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Your mortgage, your terms

Your mortgage will be part of your life for a long time and so you'll want to find a mortgage with terms that work for you. All the fine-print details define how quickly you’ll be able to pay it off and truly own your home. We can help you understand what it all means and pick the one that’s best for you.

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Keep in mind...

Interesting fact: thirty percent of loan applications are denied. If that happens, you still have options! Try a different lender, save a bit more, or take steps to improve your credit.

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Questions to ask

Knowing what to ask your lender will help you learn everything about what they’re offering. Keep provides questions you can ask your lender to deepen understanding.

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Explore PMI

Private mortgage insurance protects the lender if you can’t pay the mortgage. It’s part of your mortgage payment and you can cancel it once you pay down 20% of your principal.

What makes up a mortgage?

There’s a head-spinning amount of different home loans out there: fixed-rate, adjustable-rate, balloon payment, interest only. Fixed-rate is the only type we recommend. Consider starting there. All the others are risky for first-time homebuyers, but we can help you understand what they are. Here’s a crash course: All loans are made up of the same four parts: the principal (total loan amount), interest (what the lender charges you for lending), taxes (unique to where you live), and insurance (homeowners + mortgage). Every time you make a payment, you shrink the principal a little. That means, every month, less of your payment goes to interest and more goes to equity.

Know your lenders

The terms of your mortgage depend on the type of lender you choose. Conventional loans come from private companies and offer the best rates. Fannie Mae and Freddie Mac work with those lenders to subsidize low down payment loans to people with more modest incomes.

Loans can also come directly from the government. The Federal Housing Administration offers loans designed to benefit first time homebuyers. The Veteran’s Administration offers terms to service members that are hard to beat.

Every state, city, and county offers loans, too. Do a little digging, and you’ll be surprised at how many options you’ll find.

Getting qualified: Behind the scenes

Submitting your financial life for approval is never easy. If you understand what lenders are looking for, you’ll feel more in control. You probably know that you need enough income to pay a mortgage, not too much debt, and pretty good credit.

Here are some more specific, but still pretty simple truths. The lender will calculate your housing ratio (what amount of your income can safely go to a mortgage payment, usually 31%) and debt-to-income ratio (how much can go to your mortgage plus debt payments, usually 41%). They will run your FICO credit score, which summarizes your credit use (how much and how well you pay it) with one number on a range from 350-850.

Unlock your loan shopping superpower

When you know what makes up a loan, understand the different types, and know your lenders, you have everything you need to compare all the options. You’ll find all the basic terms online. Compare apples to apples: 30-year mortgages to 30-year mortgages; fixed-rate to fixed-rate.

Choose your favorites and ask the lenders to pre-approve you. Getting pre-approved is a real pro-tip: you’ll head into your home search knowing exactly what you can spend and you’ll be ready to make an offer when you find a winner.

The loan you pick will be locked in when you close on the home.

  • Pro Tip:

    Understand FICO

    With a FICO score below 600, it will be difficult to get qualified. Between 600-680, you might qualify with higher interest rates and fees. Between 680-750, you’ll get a good rate and standard fees. Over 750, you’ll get the best available terms.

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