Understand Your Financing Before You Start Shopping
Buying a home is as much a financing decision as it is a house-hunting one. The more you understand about how mortgages work — the loan types, the terms, the process — the more confident you'll feel when it's time to make an offer.
Start here
Below is a plain-English breakdown of the basics, plus a few deeper dives into the topics that matter most. No jargon dump — just what you need to speak the same language as your loan officer and agent.
Common loan options at a glance
A quick, plain-language overview of the loans most first-time and repeat buyers consider.
Conventional Loans
The most common type of mortgage, not backed by a government agency. Typically requires a stronger credit profile and a down payment as low as 3%, though 5–20% is more typical. Good fit for buyers with solid credit and steady income.
FHA Loans
Backed by the Federal Housing Administration, FHA loans are built for buyers with lower credit scores or smaller down payments — as little as 3.5% down with a 580+ credit score. A popular choice for first-time buyers.
VA Loans
Available to eligible veterans, active-duty service members, and some surviving spouses. Backed by the Department of Veterans Affairs, VA loans often require no down payment and no private mortgage insurance (PMI).
USDA Loans
Designed for buyers purchasing in eligible rural and suburban areas. USDA loans can offer 0% down for qualifying buyers who meet income limits.
Jumbo Loans
For loan amounts that exceed conventional loan limits (used for higher-priced homes). Jumbo loans typically require stronger credit, a larger down payment, and more cash reserves.
A mini-glossary
The six terms you'll hear on repeat once you start talking to lenders.
- Down Payment
- The portion of the home's purchase price you pay upfront, in cash. The rest is covered by your mortgage.
- PMI (Private Mortgage Insurance)
- An extra monthly cost required on most conventional loans when your down payment is less than 20%. It protects the lender, not you, and can usually be removed once you reach 20% equity.
- Interest Rate vs. APR
- Your interest rate is the cost of borrowing the loan amount itself. Your APR (Annual Percentage Rate) includes the interest rate plus most lender fees, giving you a fuller picture of the loan's true cost.
- Escrow
- An account your lender uses to collect and pay your property taxes and homeowners insurance on your behalf, usually as part of your monthly mortgage payment.
- DTI (Debt-to-Income Ratio)
- The percentage of your monthly income that goes toward debt payments (including your future mortgage). Lenders use this to help determine how much you can borrow.
- Closing Costs
- Fees paid at the end of the home-buying process to finalize your loan and transfer ownership, typically 2–5% of the purchase price.
Short reads on the questions we hear most
Know your budget before you shop.
A quick conversation with a licensed loan officer turns "somewhere in this range" into a real preapproval letter you can shop and offer with.
You do not have to figure this out alone.
Start learning today and take the homebuying process one clear step at a time.