The loan term or ‘repayment period’ on your mortgage determines how large your mortgage payments will be. It also determines how much interest you’ll pay in total. Therefore, the best loan term balances your loan costs with your monthly budget. Shorter loan terms cost less over time but have higher monthly payments. Most mortgages have 15– or 30–year loan terms. You can also find 10– or 12–year loan terms. You could even find an 8–year term through Rocket Mortgage’s “Yourgage” loan.

A fixed–rate mortgage locks in an interest rate and payment for the life of the loan. With today’s fixed rates hovering around historic lows, a fixed–rate loan makes a lot of sense.

An adjustable–rate loan features a fixed rate for a while, but then the interest rate fluctuates with the market each year. Some borrowers choose an adjustable–rate mortgage (ARM) if they plan to sell or refinance the home within the first few years. Otherwise, ARMs can be quite risky.

A larger down payment opens up more mortgage opportunities for borrowers, but not all new home loans require a large down payment. The USDA and VA loan programs, for example, offer zero–down mortgages. Conventional loans typically require at least 3% down, and FHA loans require 3.5% down. The main drawback of a low–down–payment loan is that they typically require mortgage insurance, which increases your monthly payment. A conventional loan with 20% down will prevent the borrower from paying mortgage insurance, because the new homeowner already has enough home equity to absorb the lender’s losses in case of a foreclosure.

Your loan officer will scrutinize your credit report closely. They will look at credit scores. But they will also look at payment history, credit inquiries, credit utilization, and disputed accounts. They want to see a strong borrowing history where you’ve consistently paid back loans on time.

The loan officer will also look very closely at your income and asset documentation, to make sure you have enough cash flow to make monthly mortgage payments.

“Mortgage processing” is when your personal financial information is collected and verified. It is the Loan Processor’s job to organize your loan documents for the underwriter. They’ll ensure all needed documentation is in place before the loan file is sent to underwriting.

For most lenders, the mortgage loan process takes approximately 30 days. But it can vary quite a bit from one lender to the next. Banks and credit unions tend to take a bit longer than mortgage companies. Also, high volume can alter turn times. It may take 45 to 60 days to close a mortgage during busy months.