Buying a home · Stage
Financing
How mortgages work, what lenders look at, and how to compare loan products honestly.
The financing stage is where the buyer engages a lender, chooses a loan program, and produces a preapproval letter strong enough to compete on real offers. Most of the dollar consequences of a multi-decade loan get set during this stage, which is why the lender shop is one of the higher-leverage hours of the entire journey.
- Choosing between conventional, FHA, VA, and jumbo programs based on the borrower's situation and the property
- Comparing Loan Estimates from two or three lenders side-by-side rather than relying on rate quotes
- Deciding between rate-and-points trade-offs given the expected hold period
- Locking a rate when timing and market conditions support it
- Producing a preapproval letter strong enough to compete on real offers
Questions to ask at this stage
Ask yourself
- What's the realistic hold period in this home, and does that align better with a fixed-rate or an ARM?
- At what monthly payment does the budget start to feel uncomfortable, regardless of what the lender says is qualifying?
- Does the loan officer have a reputation for not pushing every rate decision toward the lender's preferred outcome?
Ask each loan officer
- Can you produce a written Loan Estimate so the offer can be compared apples-to-apples with other lenders?
- What's your threshold for granting an exception if my income, asset, or credit picture is unusual?
- How does the rate-and-points trade-off look against my expected hold period in this home?
Articles in this stage
- Conventional, FHA, and VA loans, and what each one actually costsThe three main residential mortgage products work very differently underneath. Knowing which costs scale with the loan, which scale with the home, and which roll into the financed balance matters more than the rate quoted on the rate sheet.
- Fixed-rate and adjustable-rate mortgages, and when each one makes senseA 30-year fixed mortgage is the default in the US for good reason, predictable payments and interest-rate risk borne by the lender. ARMs trade some of that predictability for a lower initial rate, and the math behind that trade is worth understanding before signing.
- How much house you can afford, and why the lender's number isn't the answerA lender's preapproval tells you the most you can borrow on paper. What you can comfortably afford to live with is usually a smaller number, and the gap between the two is where most first-time buyer regret starts.
More in the buyer journey
- 01Getting startedDeciding whether to buy, sizing up affordability, and understanding what the next year looks like.
- 02 · You are hereFinancing
- 03SearchingHow to read listings critically and how the market actually moves in any specific area.
- 04Making an offerWhat goes into a contract, how negotiation typically works, and which terms carry the most weight.
- 05Under contractInspections, contingencies, appraisals, and the period when the deal is at most risk of falling apart.
- 06ClosingThe legal mechanics of transferring ownership, the closing disclosure, and the day itself.
- 07AfterThe first year of ownership, the homestead exemption, and the tax basics buyers commonly miss.