What Is a Mortgage? Types, Requirements, and How to Qualify

🔑 Key takeaways

• A mortgage allows you to buy a home now and pay for it over time, with interest, fees, and taxes added along the way.
• You usually need a down payment, a reliable source of income, strong credit, and proof of savings to qualify for a mortgage.
• Mortgages aren’t one-size-fits-all. You can choose from options like a 15- or 30-year conventional fixed-rate mortgage or less common options, like a jumbo loan or an adjustable-rate mortgage. 
• Always talk with a loan officer to get the full picture on what your mortgage options are.

What is a mortgage?

A mortgage is a long-term installment loan for buying a home or other real estate. When you get a mortgage, you agree to repay the lender in predetermined monthly payments over an extended period (usually 15 or 30 years).[1] Your monthly payment includes a portion of the original principal amount you’ve borrowed plus interest, fees, and taxes if you’re using an escrow account.[2]

How do you get a mortgage?

You can get a mortgage from banks, credit unions, online lenders and direct mortgage companies. You must meet the lender's mortgage qualifications, submit an application, and get approved for the loan. The property you're buying also must meet certain requirements for you to qualify for the mortgage; lenders want to make sure you can make the payments before they give you one and that the home itself isn't risky collateral.

One big qualifying factor is how much you have saved for your down payment, though certain homebuyer programs (such as VA, USDA, or FHA loans) require little or no down payment. Other areas a lender assesses are your savings balances, credit history and score, and whether you have steady and reliable income.

For first-time buyers especially, pulling all of that together can feel overwhelming, and the mortgage content you'll find online isn't always built to help. A lot of what shows up in search results and social feeds is advertising dressed up as advice, and even the legitimate information can't account for your specific credit profile, down payment situation, or local market. 

The most useful guidance tends to come from people who've actually closed on a home recently, or who work in the industry day-to-day.

"Speak with somebody that has recently bought a house since the pandemic, since 2020 — figure out what pitfalls they ran into," says Chris Kuclo, Loan Officer at Best Interest Financial. "Reach out to somebody you trust, somebody that does something in the industry, whether it's an attorney, a real estate agent, or a mortgage professional."

What are the most common types of mortgages?

Conventional loans still dominate the U.S. purchase market, accounting for roughly 70% of all 2024 purchase originations, per Home Mortgage Disclosure Act (HMDA) data released by the Consumer Financial Protection Bureau.[3]

But first-time buyers have been leaning harder on government-backed loans as affordability tightens: FHA, VA, and USDA programs made up a record share of agency purchase lending in Q1 2025, according to ICE Mortgage Technology's Mortgage Monitor. The average first-time buyer using a conventional loan put down about $77,000, while first-time buyers using FHA loans put down closer to $16,000.[4]

Usually, as long as your debt-to-income ratio is low enough and your credit score is high enough, a conventional fixed-rate mortgage is the most common choice. Its fixed interest rate means the rate you pay will never change, making monthly payments more predictable and easier to budget for. Conventional loans also usually offer better rates and lower fees.

There are also unconventional mortgage options to choose from, which might make sense depending on your situation:

• Jumbo loans: Jumbo loans let borrowers exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). For 2026, the baseline conforming loan limit is $832,750 for a one-unit property in most U.S. counties, rising to $1,249,125 in designated high-cost areas. Any mortgage above those limits is a jumbo loan. The exact cutoff depends on which county you're buying in.[5]
• 40-year mortgages: This mortgage option spreads your mortgage debt over a longer period. Monthly payments can be significantly lower than a 15- or 30-year mortgage, but you'll pay more in interest overall. These loans may come with higher rates because they are not purchased by Fannie Mae or Freddie Mac.[6]

If you put down less than 20%, you'll pay an extra monthly cost. Learn what PMI is and how to get rid of it.

How to qualify for a mortgage: A checklist

Before you talk to a loan officer, work through these steps to give your application the best shot at approval:

1. Pull your credit reports for free. Request free copies from all three bureaus at AnnualCreditReport.com. Dispute any errors or outdated collections before you apply. A single disputed item could move your score 20 to 100 points.
2. Calculate your debt-to-income (DTI) ratio. Add up your required monthly debt payments — car loans, student loans, minimum credit card payments, child support — then divide by your gross monthly income. Example: $2,200 in monthly debts ÷ $8,000 gross monthly income = 27.5% DTI.
3. Build your reserves. After your down payment and closing costs, lenders want to see at least 2–3 months of housing-related savings still in the bank. This is the cushion underwriters look for.
4. Gather your paperwork early. Two years of W-2s, your two most recent pay stubs, two months of bank statements, and two years of tax returns (especially if you're self-employed). Chris Kuclo, a BIF loan officer, puts it bluntly: "Avoid multiple crazy cash deposits into the account. Keep your documentation as simple as possible. There's going to be a lot of documentation around where your assets are coming from for the transaction."
5. Get preapproved with 2–3 lenders inside a 14–45 day window so credit-scoring models treat multiple pulls as a single inquiry, protecting your score while you shop.
6. Run the numbers. Use our mortgage calculator below to confirm a target monthly payment you can live with — then only look at homes priced inside that range.

What happens if I stop making my mortgage payments?

When you stop making payments toward your mortgage loan, the bank or lender can take your home back. This process is called foreclosure. It involves the lender taking the house, selling it, and using the sale proceeds to cover your unpaid mortgage balance. 

Aside from the risk of losing your home, non-payment is reported to the national credit bureaus: Experian, Equifax, and TransUnion. A defaulted mortgage loan and missing payment history can pull your credit score down, and potentially affect whether you can get a mortgage in the future.

How to get help with your mortgage payments

Home foreclosure is a worst-case scenario, and there are opportunities to get temporary mortgage relief before the situation gets dire. Here are a few:

• Temporary relief programs: Ask your mortgage servicer about short-term relief options that you might qualify for. Some lenders offer forbearance, which pauses or lowers payments temporarily.
• Loan modification: See if your lender is willing to permanently alter the terms of your loan so that payments are more affordable.
• Mortgage refinance: Refinancing is when a new refinance lender pays off your original mortgage loan, and creates a new one in its place. The refinanced loan has a new rate and terms, and you’ll direct payments to the new lender. 

Before buying a house, ensure you have a financial buffer to help you stay afloat during financial hardship. Avoid pouring your entire life savings into your down payment. Instead, retain some savings for unplanned income changes, and redirect some of your discretionary income to savings each month. 

A general rule of thumb is to not get a mortgage payment that exceeds 28% of your gross monthly income, although there are always exceptions to this depending on your financial situation and long-term plans for the mortgage.

Usually sticking below 28% will protect you from taking on a mortgage payment that might make it difficult for you to meet your other financial obligations. You can read more about the reasoning and math behind the Federal Deposit Insurance Corporation (FDIC)'s 28% recommendation. 

How can I compare mortgages from different lenders?

If you ask them, each lender will provide you with a free loan estimate that won't affect your credit score. This standardized document outlines the mortgage offer interest rate, annual percentage rate (APR), your monthly payment, repayment term, and closing costs.

If you want more concrete numbers, you can also get preapproved by multiple lenders to compare offers. Preapprovals require submitting more documentation, but the numbers will be more accurate.

While preapprovals involve a hard credit inquiry, credit scoring models generally group multiple mortgage inquiries into just one inquiry as long as they're made within a 14- to 45-day shopping window (depending on which FICO scoring model your lender uses).[7]

Once you have a few loan estimates in hand, the rate is the easy part to compare. What separates a smooth closing from a stressful one is harder to see on paper: how upfront the lender is, how fast they respond, and whether they'll structure the loan around your finances.

"Your three big things are openness. How the process works, and what the information is, right up front. Second, communication and availability: people who pick up the phone and respond quickly. And the third thing is a lender who understands your finances and is willing to work with them," says Kuclo.

How to get help choosing a mortgage

Working with a mortgage broker can streamline the process of choosing a mortgage. Mortgage brokers don’t lend money directly. Instead, they tap into their extensive mortgage lender network to find a loan that you qualify for. They can scour multiple mortgage loan products at once to help you compare offers in one sitting based on your credit, income, and long-term goals.

If you’re ready to start shopping, Best Interest Financial can help. Best Interest Financial is a mortgage broker with a team that has decades of experience closing over $1 billion in loans. They're experts at identifying solutions that large retail banks miss. Talk with a Best Interest loan officer to explore your mortgage options.