Buying a house for the first time is an exciting prospect. While having a place to call your own can be a dream for many people, it also comes with a major investment. Since most people don't have the funds to purchase real estate outright, they need to take out a mortgage loan to cover the costs. If you're planning to purchase your first home, here's what you should know about getting a mortgage.

What Is a Mortgage?

A mortgage is a loan used to purchase a house. In exchange for a set amount of money — the cost of the home, the lender earns interest throughout the duration of the loan. In many cases, additional expenses, like annual property taxes, are included with the mortgage payment as well. 

The repayment periods are available in 15 and 30-year increments. While the latter generally offers lower monthly payments, it's associated with a higher interest cost. You also choose between an adjustable and fixed interest rate. 

What's the Process?

Around 15 million people in the U.S. apply for a home loan each year, and the process for each is incredibly similar. Start by thoroughly researching lenders and loan types.

Once you've chosen a financial institution or mortgage broker, apply for preapproval. This step allows the lender to review your qualifications — like credit history and debt-to-income ratio — and determine your eligibility ahead of time, including a maximum loan amount. 

When you've found the right property, you'll submit it to the lender. Before finalizing the mortgage, they evaluate the home and take a more in-depth look at your financial circumstances, which is known as underwriting. Once final approval is given, you can close on the house and take legal ownership. 

What Are the Different Types?

There are three main types of loans available for buying a house: Conventional, FHA, and USDA. Conventional typically requires a down payment of anywhere from 10% to 30% of the home's value.

The other two are government-backed, so the down payments are less — 3.5% for an FHA and zero down for USDA. However, USDA mortgages are limited to rural areas. There are also VA loans available for active and retired veterans and their immediate families. 


Ready to buy a house in the Greensboro, NC, area? Turn to Jay Brower—Allen Tate Realtor® for  personalized assistance. As a Guilford County native, the client-driven real estate agent offers valuable insight into the real estate market across the Piedmont Triad region. Browse his current home listings online, and let him guide your property search by calling (336) 337-1887.