understanding mortgages

Understanding Loans and Mortgages

Chapter 2

A Guide to Different Home Loan & Mortgage Options

Once you’ve saved up enough money for a down payment on a house, you’re ready to meet with a mortgage lender to learn about your mortgage options. Stay ahead of the game by learning the home loan basics before that meeting, and you’ll be ready to get a mortgage pre-qualification.

How Mortgages Work

To start, understanding mortgages is important. A mortgage is a loan from a bank or creditor to help you finance the purchase of a home. The home you buy will technically be owned by the bank until you pay back the loan. If you fail to pay back the loan, your lender can take over the house, which is known as a foreclosure.

Your mortgage payment includes several separate payments:



Keep track of your payments and once you believe you’ve hit 20 percent in equity, let your lender know so they can remove the PMI from your payments.

Different Types of Home Loans and Mortgages

Keep in mind, there are many types of home and mortgage loans available aside from what’s included, so take the time to dig into your options and find what works best for your financial situation. Get in the know by taking a look at some of the most popular options.

The Difference Between a Pre-approval and Pre-qualification

What’s the difference between the two? Here’s everything you need to know about pre-approvals and pre-qualifications.

Down Payments and Private Mortgage Insurance

Private mortgage insurance typically goes by the acronym PMI. Simply put, lenders feel more comfortable giving a home loan to borrowers who can put at least a 20 percent down payment on the home purchase. If you don’t have the full 20 percent, you’ll have to pay PMI. This insurance is designed to protect the lender in case you quit making your home loan payments.

Choosing Your First Mortgage

A little research goes a long way in the world of homeownership. You’re already on your way by taking the time to learn some of the common terms and the basics of home loans. Continue your positive momentum by talking to several different types of lenders to see who offers the best rates and conditions. Getting referrals from your friends and talking to your regular banker is also a great way to start!

Getting a Mortgage Pre-approval

Another smart move to make before shopping for a home is getting pre-approved for a mortgage, rather than pre-qualified. Getting pre-approved shows a seller that your financing is in order and you’re serious about purchasing a home. Want to know more?

More Chapters in This Guide

Steps for First-Time Home Buyers

Not sure where to start when buying a home? Our first time home buyer guide explains what you need to know about buying your first home. Learn more today!

Back to Beginning >

Saving for a Home

Saving money is one of the most important steps to buying a home. Learn how to save up for a down payment for a house with our first - time home buyer guide

Chapter 1 >

Understanding Loans and Mortgages

Buying a house but confused by financing? Learn about the different types of home loans and mortgages with our first-time home buyer guide.

Chapter 2 >

Understanding Loans and Mortgages

Starting to shop for homes but don't know where to start? Learn about what to look for when buying a house so you can find the perfect home for your needs..

Chapter 3 >

Putting an Offer on a House

Found the home of your dreams and want to place an offer? Read our tips for making an offer on a house and learn how much to offer to stay competitive in the market

Chapter 4 >

The Home Inspection and Appraisal Process

What can you expect from the home appraisal and inspection process? Our homebuyer guide is here to help demystify home inspection and appraisals. Check it out today!

Chapter 5 >

Understanding Homeowners Insurance

Choosing the right insurance policy for your new house is another important step in the home buying process. Learn about how homeowners insurance works and find the best coverage for your home today.

Chapter 6 >

What to Expect on Closing Day

Closing on a house is an exciting yet hectic time, but don't worry. Our closing day checklist and tips can help you succeed. Learn more from American Family.

Chapter 7 >

What to Do After Closing on a House

Congratulations! You've closed on your home and can start making it your own. But there are a few final steps you'll need to take. Use the following resources to make your transition into your new home as smooth as possible.

Chapter 8 >

Looking for More Guidance on Homeowners Insurance?

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Homeowners Resources

Explore our tips to safeguard your home.