What is a Mortgage and What Goes into It?

Simply put, a mortgage is a financial transaction. It’s a promise, with official documentation and government regulations, that you will repay a large debt. Homeownership is a big investment and responsibility, which is why it’s best to be prepared and work with a local lender you trust.

Like the people they help, mortgages come in a wide variety of options. There are options for low-income borrowers, people purchasing luxury dream homes valued in the millions, or and for homebuyers just starting the journey.

Here are just a few things you should know before starting the home loan application process.

What are Mortgage Rates?

When it comes down to it, your mortgage will exist as a piece of paper and a promise. When you’re officially ready to being the home loan journey, one of the first things you will need to know about is rates.

Mortgage rates are the interest charged on your loan and are constantly changing because based on market conditions. Market conditions take into consideration, the economy, characteristics of the housing market, and the feral monetary policy. Your current financial situation will also impact the interest rate you get on your home loan.

The lower your interest rate, the cheaper your loan will be. If this is your goal, consider what type of loan you’ll apply for, your qualifying factors, and the market condition – these are all things our experience mortgage loan originators can help you with.

Paying attention to the housing market will also help determine the interest rate you may be able to get. A buyer’s market favor those looking to purchase a home and could lead to you locking in a low interest rate.

What is an Annual Percentage Rate?

Different than your loan’s interest rate, the annual percentage rate is the overall cost of the mortgage. This includes interest, closing costs, and a variety of other fees accumulated of over the lifetime of the loan.

How Do I Qualify for a Mortgage?

You may not even realize how easy it is to qualify for a mortgage. To find out what the best options for you are, it’s best to get pre-qualified. Pre-qualification is when a bank or lender will ask you to provide them with a current snapshot of your financial health.

When you apply for a mortgage, our underwriting team will compare the different qualification as they assess your creditworthiness. They’ll look at the full picture and examine various factors like employment history, income level, debt-to-income ratio, credit history, and down payment.

Our lenders want to know that you a consistent income and one that will support a mortgage.

Our Wide Variety of Mortgage Options

As a potential homebuyer, you will find that our local lenders offer a few popular loan types: Conventional, FHA, USDA, and VA loans. Each loan is designed to benefit homebuyers in different ways.

Click here to see all of our available programs here.

What Makes up a Mortgage?

There are four main parts that make up your monthly mortgage payment: principal, interest, taxes, and insurance.

  • Principal is the actual amount that you borrowed.
  • Property taxes can range from 0-2.5% of your monthly payment. It’s common to find that the property tax will also be added to your monthly mortgage payment
  • Interest is the annual cost to borrow money. It is paid monthly.
  • Mortgage insurance protects your lender if you default on the loan. In most cases a premium is calculated annually based on a percentage of your loan and charged monthly.  Mortgage insurance remains on a Conventional Loan for 11 years on a 30-year loan term. While as FHA and USDA require mortgage insurance for the life of the loan.

What are Closing Costs?

Closing costs are the fees you pay for closing a mortgage. At the closing table, you’ll sign all your mortgage documents and finalize the paperwork that make you the effective owner of your home. Your closing costs will be 2%-5% of your home purchase price, with varying factors impacting that percentage. Some of these variables include the state you close in, the type of loan you receive, and even your lender. You can look for an itemized list with specific closing fees on your loan estimate and closing disclosure.

My Mortgage is Paid Off, Now What?

Your will receive a mortgage release. This document, also known as mortgage satisfaction paperwork, shows that your loan is paid in full, and the lender no longer owns a lien against the house. Once you have officially paid off your home and your mortgage are free and clear, you are going to have to start paying any monthly charges, such as insurance, and property taxes yourself.


Applying for a mortgage does not have to be complicated. When it comes down to it, a loan is simply a promise to repay a large amount of money and they are easier than ever to obtain. Not only are there plenty of loan options, but at USA Mortgage, we make it easy to apply with our mobile loan app and team of experienced mortgage professionals. If you are thinking about taking the next steps with your mortgage journey, visit usamortgage.com/find-a-branch.

Stay informed in
our Learning Center

Visit Learning Center

Possibility starts here.
Get approved for your mortgage.

It may be hard to believe, but in just a few clicks, a new home or mortgage savings could be yours. Whether you’re looking for a rate that works for you or searching for your local branch, there’s no commitment. Get started today!