What is a Mortgage?

You’ve definitely heard of a mortgage before. But do you understand what a mortgage really is or how it works?

*RECORD SCRATCH*

Let us break it down for you.

What is it?

A mortgage is a loan for real estate. Just like any loan, you must apply and be approved for a set amount of funds. Ideally, you’ll work with a really awesome credit union (i.e. the UNbank… just sayin’), where you can secure a solid rate on the loan, which you’ll then be responsible for repaying over an agreed upon number of years.

What Do Lenders Look At?

Good question! The big three are:

• • Income: We gotta know that you’re making enough money to pay us back.
  • Credit Score: This number gives us an idea of your history of paying debts.
  • Debt-to-Income Ratio: It’s exactly what it sounds like! How much debt vs. income do you have? Lenders use this equation to determine how much you can afford to borrow and pay back.

Money Breakdown

Here are some important terms to know when it comes to buying a home.

• • Closing Costs: The fees, expenses and charges for the services needed to finalize the homebuying process and make it a done deal.
  • Down Payment: This is money you pay upfront as a percentage of the purchase price of your home. Most people pay 20%, but that isn’t a universal requirement. Check out the minimum down payments for the loans we offer:
    • • FHA Loan: 3% down
      • VA Loan: as little as 0% down
      • Conventional Loan: 3 to 5% down
      • USDA Loan: as little as 0% down
  • Principal: The money the lender loans to you, not including interest.
  • Interest: The cost of borrowing money. Your rate depends on a whole bunch of factors, but you can trust that we work hard to secure the lowest rate possible for our members.

Different Mortgage Types

There’s more to mortgages than you may think. Let’s break down the most popular types of loans.

• • Conventional Loans: This loan is not backed by the U.S. government.
  • Government-Backed Loans: These loans are backed by the U.S. government to make homeownership more accessible. This includes:
    • • FHA Loans
      • VA Loans
      • USDA Loans
  • Jumbo Loans: No dream home is out of reach with this loan! These loans exceed the Federal Housing Finance Agency loan limits to help you finance a more expensive home.
  • Fixed-Rate Mortgage: As the name suggests, your rate will stay the same throughout the life of a loan.
  • Adjustable-Rate Mortgage: With this loan, your interest rate will gradually increase (or potentially decrease) at pre-determined intervals.

Buying a home should be exciting, not stressful. Our team of trusted loan officers is here to help you navigate the process and keep things UNcomplicated.

This blog is intended for educational purposes only. For details about specific products or services, see credit union for details. For questions about investments, please consult your financial advisor.