{"id":4582,"date":"2023-06-05T15:49:00","date_gmt":"2023-06-05T22:49:00","guid":{"rendered":"https:\/\/www.soundcu.com\/?p=4582"},"modified":"2025-10-21T17:18:31","modified_gmt":"2025-10-22T00:18:31","slug":"mortgages-101-getting-started-on-the-path-to-homeownership","status":"publish","type":"post","link":"https:\/\/www.soundcu.com\/blog\/mortgages-101-getting-started-on-the-path-to-homeownership\/","title":{"rendered":"Mortgages 101: Getting Started on The Path to Homeownership\u00a0"},"content":{"rendered":"
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When you embark on the search for a new home, you may think you know the steps to take: Read the listings, visit some open houses, sign on with a Realtor, make an offer. In fact, there\u2019s a big one missing from that list. A step as important financially as the house you decide to buy itself: Get a mortgage.<\/p>\n

It\u2019s widely understood that most houses and apartments are purchased using mortgage loans, which the Consumer Financial Protection Bureau defines as \u201can agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you\u2019ve borrowed plus interest.\u201d Sounds serious \u2014 and it is. Mortgages come with a wide variety of lengths (called the term), repayment provisions and interest rates<\/a>. Locking in the one that\u2019s best for you means getting something of an education. Especially if you\u2019re a first-time homebuyer, it pays to learn the ins-and-outs of mortgage financing so you\u2019ll know what to expect.<\/p>\n

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>Mortgage 101<\/h2>\n

Before you even start to look for a mortgage, you\u2019ll want to understand how they work. The most common type of mortgage is what\u2019s called a 30-year fixed rate loan. As it sounds, you have three decades to pay the money back with the rate of interest that you lock in initially fixed for the entire time. You\u2019ll also see 15-year and sometimes 10-year fixed rate loans. These require you to pay off the home in a shorter period of time, but because the bank is lending the money for a shorter term, the risk that you won\u2019t repay the money is lower. That\u2019s the reason interest rates on shorter-term loans are lower than those on longer-term ones.<\/p>\n

The other primary type of home loan is an adjustable rate mortgage (ARM). Here, the initial monthly payment is lower than prevailing interest rates (which allow buyers to qualify to borrow more money), but over time the rate adjusts in sync with current interest rates or another financial index. If rates rise, your monthly payment will rise. There\u2019s typically a cap that limits how far up it\u2019s allowed to go. If rates fall, your monthly payment may fall as well. Hybrid ARMS, which you may see represented as 5-1 or 7-1 ARMs, are fixed for the first 5 or 7 years of the loan, then begin adjusting. If you believe you will only live in a home for 5 or 7 years before moving, for example, this can be a way to lower your monthly payments without taking on too much risk. Check out our home loan calculator<\/a> to help you navigate the costs of buying a home.<\/p>\n

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Qualify For The Best Rate On A Mortgage<\/h2>\n

Getting the best rate on a mortgage involves two things: shopping around (there are often significant interest rate differences among lenders) and your own credit. Before you begin shopping for a house, do your own homework to determine your creditworthiness and prepare for a conversation with a lender.<\/p>\n

First, gather tax returns, pay stubs and other paperwork that documents your income for the past two years. You\u2019ll also need documentation of liquid assets, cash on hand, as well as credit history and your current income. That may include credit union, bank and investment account statements. If you\u2019re not familiar with your credit rating, request a free copy<\/a> of your credit reports from the three major credit bureaus, Equifax, Experian and TransUnion, and pull a free copy of your credit score. If you find an error on your credit report, file an error report with the bureau in question on the bureau\u2019s website. They typically take a month or two to correct it.<\/p>\n

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What Lenders Are Looking For<\/h2>\n

As you gather information, keep in mind what lenders are looking for. These things will help you get the loan you\u2019re looking for:<\/p>\n