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Buying a home is a big investment. For most, the first step toward this purchase is to be approved for a mortgage.

It’s important to know the benefits and challenges of a mortgage, as well as the terms of the mortgage contract. Here is what you need to know about mortgages before you apply for one.

What is a Mortgage and How Does It Work?


A mortgage is a type of loan from a bank or mortgage lender that helps you purchase or refinance a home. While there are several types of mortgage loans available, two of the most common are Fixed-Rate and Adjustable Rate.

When you obtain a mortgage, you are entering into an agreement with the lender where they purchase the home on your behalf; in exchange, you agree to pay back the borrowed money and interest over a specific period of time. The interest amount you pay will depend on whether you have a fixed-rate or adjustable-rate mortgage.

Prior to obtaining your mortgage, you will be required to pay closing costs. These are charges and fees that need to be paid up front before you can sign for your mortgage. These fees are to cover costs incurred for title searches, appraisal fees, surveys, etc. Closing costs usually amount to about 2% to 5% of your total mortgage.

You may also need to pay for other items that must be paid at closing to start your escrow account, which pays for property taxes and mortgage insurance on your home.

Each month you will make a payment to the lender. A portion of the payment goes to the principal loan amount and the rest goes to interest. There is also the option to roll your estimated property taxes, also known as escrow, into your monthly payment.

Payments will continue until the entire loan amount has been paid off and the home is officially yours.

Types of Mortgage Lenders

When looking for a mortgage, you’ll come across two main terms: mortgage lender and mortgage broker.

A mortgage lender is a financial institution or bank that offers and underwrites the loan. They are the ones who set the terms, interest rate, repayment schedule and other key aspects of your mortgage.

A mortgage broker is an intermediary between you and the mortgage lender. They cannot set terms, rates or schedules. They only collect your paperwork, ensure everything is in order, counsel you on how to improve your credit score (if needed), and find you the best rate by talking to multiple lenders on your behalf.

Working with a broker can be helpful to navigate getting a mortgage; however, it can be easier and cheaper by saving you from paying the broker’s fee if you go straight to a lender, such as Vantage Bank, who has professionals with years of experience in the mortgage industry.

Getting a Mortgage

To get a mortgage, you can start by contacting on of our mortgage specialists. Your lender will review your application details, which include items such as your credit report, income and the amount you have saved for a down payment. This information is then used to determine whether or not you are a candidate for a mortgage loan.

Once the lender determines that you meet the basic qualifications needed for a mortgage, they will move forward with the process and use your financial information, such as credit score, proof of income and collateral assets, to set the interest rate and APR terms. To help speed up this process, it’s a good idea to have all of the necessary documents ready beforehand.

Additionally, if you have friends or family that intend to give you money towards your home’s down payment, then you must provide the mortgage lender a “gift letter" for the mortgage, in which the person gifting the money states that they do not expect reimbursement for their gift.

Mortgages can seem incredibly complicated at first glance. Because of this, it is essential that you take the time to do your research and look into your various lender options and mortgage promotions.

With help from Vantage Bank Texas, the dream of owning your home can finally become a reality.