The essentials
What is a mortgage?
A conventional mortgage is not insured or guaranteed by a federal housing program. Conforming loans meet size and underwriting rules for purchase by Fannie Mae or Freddie Mac; jumbo loans exceed applicable conforming limits.
Compare official Loan Estimates using interest rate, APR, points, lender credits, cash to close, projected payments and the five-year comparison. Fixed rates stabilize principal and interest. Adjustable-rate mortgages can change after an initial period according to an index, margin and caps.
How it works
- 01
Prepare credit, income, asset and debt documents.
- 02
Request Loan Estimates from multiple lenders in a close time window.
- 03
Compare rate-and-fee combinations and lock terms when appropriate.
- 04
Complete appraisal, title, underwriting and closing; then make payments and maintain taxes and insurance.
When it can—and cannot—make sense
Potentially useful when
- The full housing payment leaves room for repairs and savings.
- The borrower expects to remain long enough to justify closing costs.
- Rate risk is understood.
- Cash-to-close does not exhaust emergency reserves.
Pause when
- Affordability depends on refinancing later.
- Only the initial ARM payment is affordable.
- The lender discourages comparison of Loan Estimates.
- A large prepayment or balloon feature is not understood.
Costs and risks to count
- Interest, points and lender fees
- Appraisal, title and settlement services
- Mortgage insurance when applicable
- Property taxes and homeowners insurance
- Potential HOA dues and maintenance
TILA-RESPA Integrated Disclosures provide the Loan Estimate and Closing Disclosure for most covered mortgages. Ability-to-repay, servicing, appraisal and fair-lending rules may apply.
Questions to ask before signing
Is the rate fixed or adjustable?
What are total closing costs and cash to close?
When can mortgage insurance end?
Is there a balloon or prepayment penalty?
What payment is possible after each ARM adjustment?
Location matters
Check the rules in your state
Foreclosure method and timing, homestead protection, recording taxes, deficiency claims, licensing and assistance programs differ by state.