Understanding Mortgages

Buying a house is an exciting part of life, but you may come across words or terms you haven’t heard of before. We are here to ensure we define any term you may not hear of before so you understand completely in your home buying journey.
3 Common Types Of Mortgages


  • A conventional mortgage is a home loan that isn’t backed by a government agency, such as the FHA or VA. Conventional mortgages often meet the down payment and income requirements set by Fannie Mae and Freddie Mac, and they often conform to the loan limits set by the Federal Housing Finance Administration (FHFA).


  • An FHA loan is a mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate-income borrowers, FHA loans require a lower minimum down payments and credit scores than many conventional loans.


  • A VA loan is a mortgage loan available through a program established by the United States Department of Veterans Affairs (previously the Veterans Administration). The VA sets the qualifying standards, dictates the terms of the mortgages offered and guarantees a portion of the loan, but doesn’t actually offer the financing. VA home loans are provided by private lenders, such as banks and mortgage companies, instead.

Loan To Value: A meausrement comparing the amount of your mortgage with the appraised value of the property.

Closing Costs VS Cash To Close

Closing Costs: The fees paid at the closing of a real estate transaction.

Cash To Close: Funds needed to finalize a real estate purchase or refinance. Can include but is not limited to: Down payment, loan origination, insurance, interest, taxes, title and escrow fees.

Third Party Fees

Third-Party Fees include Title & Escrow, Appraisal and Homeowners Insurance

What is DTI

Debt To Income is the measurement of all monthly debt payments divided by your gross monthly income.

Escrow Account

An account managed by your mortgage servicer. Your mortgage servicer will deposit a portion of each mortgage payment into your escrow to cover your estimated property taxes and your homeowners and mortgage insurance premiums.  

    Interest Rate vs APR

    Interest rate: Refers to the annual cost of a loan to a borrower and is expressed as a percentage. 

    APR: Is the annual cost of a loan to a borrower including fees such as mortgage insurance, most closing costs, discount points, and loan origination fees. Like an interest rate, APR is expressed as a percentage. 

    Should I Check My Credit Before Applying

    You should refer to your mortgage professional first before doing any credit checks. As your mortgage professional can check your credit for you and give you the whole report and guide you with the home buying path. 

    Pre-Qualified vs Pre-Approved

    Pre-qualified: You are getting an estimate of what you might be able to borrow, based on the information you provide about your finances, as well as a credit check.  

    Pro-approved: You are getting a more concrete idea of what you can be approved for without a buying contract. This process involves a credit check, verification of income, and debt documents (tax returns, income statements, bank statements, retirement statements, credit reports.)

    How do I know if I qualify as self-employed?

    It’s when you own your own business and work for yourself. You have filed as self-employed with most common but limited to a 1099 form, or K1 form. For home loan qualifying purposes, you’d need at least a 1-year history for most loan programs. 

    What Is Included In My Mortgage Payment?

    Your mortgage payment typically includes principal, interest, taxes, and insurance. 

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