The fundamentals — explained clearly.
What is a mortgage?
A mortgage is a loan used to purchase or refinance real estate, secured by the property itself. You repay the lender in monthly installments — typically over 15 to 30 years — that include principal and interest, and often taxes and insurance held in an escrow account. If you stop making payments, the lender has the legal right to foreclose and recover the property.
Fixed vs. adjustable rate
A fixed-rate mortgage keeps the same interest rate for the entire loan term, so your principal-and-interest payment never changes. An adjustable-rate mortgage (ARM) starts with a lower fixed rate for an initial period (typically 5, 7, or 10 years) and then adjusts periodically based on a market index. Fixed rates give predictability; ARMs can save money if you plan to move or refinance before the adjustment period.
How rates are determined
Your mortgage rate reflects several forces: bond market movement (specifically mortgage-backed securities), Federal Reserve policy, and your personal risk profile — credit score, down payment, loan type, property type, and debt-to-income ratio. Because rates change daily, we monitor pricing across dozens of investors to lock at the right moment for your file.
Credit score basics
Most lenders use the middle of three FICO scores. Scores above 740 typically qualify for the best conventional pricing; FHA and VA programs allow scores well into the 500s and 600s. To improve your score before applying, pay down revolving balances below 30% of the credit limit, keep old accounts open, and avoid applying for new credit in the six months leading up to your mortgage.
Down payment options
The classic 20% down avoids private mortgage insurance, but it's far from required. Conventional loans allow as little as 3% down for qualified buyers. FHA is 3.5% down. USDA and VA can be zero down for eligible borrowers. Florida also offers down payment assistance programs — including Hometown Heroes — that can be stacked with these first mortgages.
Closing costs
Closing costs typically total 2–5% of the loan amount and include lender fees, third-party fees (appraisal, title, recording), and prepaid items (property tax and insurance escrow, per-diem interest). Sellers may contribute a portion, and certain programs allow closing costs to be rolled into the loan. Your Loan Estimate breaks these out line by line within three days of application.
PMI and MIP
Private Mortgage Insurance (PMI) is charged on conventional loans with less than 20% down and can be removed once you reach 20% equity. FHA loans carry Mortgage Insurance Premium (MIP) for the life of the loan in most cases; refinancing to a conventional loan is the standard way to remove it once you've built enough equity.