So, you've been scrolling websites, strolling cool neighborhoods and maybe even hitting some open houses. Then boom––you see a property that has your name all over it. Like most of us mere mortals, you can't throw down the full payment in cash. This is where a mortgage steps in to help.

But what is a mortgage loan, exactly? It's a specific type of loan that helps you cover the cost of buying property. You'll pay it back over time with interest and, in the meantime, you get to live in a home you love.

Throughout the home buying process, you’ll hear a lot of new terms tossed around. It can feel overwhelming at first, but don’t stress. Remember, every homeowner was in your shoes once and with a little light reading, you'll soon be fluent in the language of real estate...or at least you’ll get the general gist. Who knows—you might even be up for negotiating. But let’s start with the basics and build from there.

Who are the parties involved in a mortgage?

A mortgage on a house is a pretty hefty loan, one of the biggest you’ll probably ever take out (unless med school or a motor yacht are in your future). There’s more to it than simply handing the seller a check. There are safety measures involved to protect all major players, including the:

Mortgage lender: This is the financial institute who lends you the money. A bank, like Citi, or mortgage company are the ones that help fund your home. They’ll just need to make sure you’re good for the money—but more on that in a bit.

Borrower: That’s you, budding homeowner! You’re the star of this show, and you’re making a promise to pay back the loan over time. It’s a big responsibility, sure, but it’s how millions of Americans buy homes every year.

Co-borrower: Got a sidekick? A co-borrower is someone who jumps in alongside the primary borrower to apply for the mortgage. This is often a spouse, partner or perhaps a close family member who's willing to share the responsibility of paying back the loan. If the co-borrower has a solid credit score and a steady income, it can lead to better loan terms or even a bigger loan amount, which might mean being able to afford a better house.

Probably more than you imagined. Let's look at what's involved:

• Principal: This part goes toward paying back the amount you borrowed. You can chip away at it slowly, like most homeowners do, or make additional payments to reach “paid in full” a bit faster.
• Interest: Consider this the cost of borrowing money. It's the extra amount you pay the lender for giving you a loan.
• Mortgage insurance premium (MIP): This comes into play for certain mortgages, especially with the Federal Housing Administration (FHA). It requires an upfront fee and annual payments, typically divided into monthly installments. The cost depends on the loan amount, term and loan-to-value ratio. For some FHA loans, MIP lasts for the loan duration, but for others, it ends once 20% home equity is achieved.
• Private mortgage insurance (PMI): This may be needed if you put less than 20% down on your house. It protects the lender in case you default on your loan.
• Taxes and insurance: These can go into an escrow account (kind of like a safety deposit box) or depending on your mortgage loan and lender, you may be able to pay them directly if you choose to not include escrow as part of your mortgage monthly payment. We'll break this down even further so you know exactly where your money's going:
  • Property taxes are tallied based on the assessed value of your home and are used to pay for things like schools, roads and public safety—pretty important. Rates can vary a lot depending on the cost of living in your area and may increase over time, so be sure to build these costs into your budget.
  • Homeowners insurance is essential. It protects you in case unexpected damage or theft occurs. The cost of this coverage depends on the value of your home, the level of protection you choose and the particulars of your location. You're free to shop around, of course.

So, what does taking out a mortgage mean? Well, getting that stamp of approval takes a bit of work, like gathering documents you thought you’d probably never need. Thank goodness for digital paper trails. Here are some of the stages you'll encounter along the way:

1. Using our Affordability Calculator

   Start by crunching some numbers to see how much house you can afford. If you're in tip-top shape, move on to step two. If your credit score or savings account need some attention, no sweat. Now you have a clear goal to work toward.

2. Getting pre-approved

   This is an important step that shows sellers you mean business and have the financial backing to prove it. In a seller’s market, coming armed with pre-approval can help you stand out from the crowd.

3. Getting final approval

   When you’ve found a home and you're ready to make an offer, your lender will finalize the details of your loan, dotting every i and crossing every t. This is yet another layer of security that shows the seller you’re in it to win it.

4. Closing on your loan

   Drumroll, please. This is the grand finale where you sign the official papers, handle last-minute details and take hold of those precious house keys. Well done, aspiring investor, well done.

Absolutely, and each type of mortgage has its own pros and cons, so be sure to fully assess your situation when choosing the right one for you. When in doubt, ask your lender for advice.

Here’s the scoop on a variety of mortgage options:

Institutional lender loans

Banks and other private financial entities, such as Citi, offer programs that feature lenient requirements and lower expenses for first-time home buyers. For instance, Citi's HomeRun™ Mortgage is a unique program that requires a minimal down payment and assists individuals from various financial backgrounds in purchasing their first home. This program is available in select markets only and income limitations may apply.

Conventional conforming loans

These loans conform to guidelines set by the Federal Housing Finance Agency (FHFA) and are purchased by Fannie Mae and Freddie Mac. They're popular because they usually cost less.

Government-insured mortgages

Similar to conventional loans, these mortgages are offered by institutional lenders and are insured or guaranteed by the government. Being government-backed translates to some pretty cool benefits for borrowers. Here are some of the popular government-backed loan types:

• FHA loans: These are the loans that can help you break into the housing industry. Backed by the FHA, they're great for first-time home buyers or anyone who's had a few financial hiccups. With lower down payments and a more forgiving outlook on credit mishaps, FHA loans feel a bit like a financial wingman.
• VA loans: Brought to you by the U.S. Department of Veterans Affairs, these loans are a fantastic benefit for veterans, active service members and surviving spouses. With perks like no down payment (for those with 100% of their loan guarantee benefit) and no private mortgage insurance, they’re a way of saying “thank you” with extra help on the home front.
• USDA loans: For buyers in rural settings, these special loans can really save the day. With 100% financing, there’s no need to save for a down payment. And thanks to reduced mortgage insurance and interest rates, long-term expenses are lower as well.

Jumbo mortgages

When your real estate dreams outgrow that starter house, a jumbo loan might be just what you need. These loans exceed government limits and are designed for high-priced, luxury properties. Hey, you earned it—but can we come visit?

Now, there are two types of jumbo loans: non-conforming and agency. Non-conforming jumbo loans are larger, privately backed loans with flexible terms. Agency jumbo loans are also large, but they have government backing and are available only in areas where homes cost more, making them more uniform and generally cheaper. Let’s break it down:

Interest rates can fluctuate often and be swayed by a mix of factors. These include broader market conditions, which are often out of your control, as well as specific aspects of your loan and property. The type of loan you choose, your credit score, the state where the property is located, the type of property, the purpose of the loan and the loan-to-value ratio all play significant roles in determining the interest rate you might be offered.

Luckily, there's plenty you can do to set yourself up for success. Upping that credit score and showing a stable work history is one way to help get you better loan terms. If interest rates happen to drop, that's a bonus, but at least you'll know you've done everything in your power to secure a favorable rate.

Different loan options also come with varying interest rates based on their risk assessment and market position, so it’s best to chat with a mortgage specialist to help you find a loan that will get you the best interest rate for your unique financial situation.

Curious to see what current Citi interest rates are? Check out today’s current rates to compare loan types.

Here are two types of mortgage interest rates you're sure to encounter:

• Fixed-rate mortgage: This is the “Steady Eddie” of mortgages, meaning your interest rate will stay the same for the entire life of your loan, so your payments will always be predictable.
• Adjustable-rate mortgage (ARM): An option for those who are comfortable with change, this rate adjusts with the market. Rates may start out low but will rise and fall over time.

Mortgage terms: 15 vs. 30 years

You'll also have to decide between a 15- or 30-year mortgage:

• 30-year mortgage: This can keep monthly payments low, which is why most people opt for it.
• 15-year mortgage: By paying more each month, you'll save on interest in the long run. It's not for everyone, but if you've got the financial flexibility, it's worth considering.

Now, back to more of those terms we mentioned earlier. As promised, here are some handy definitions of common real estate terms:

Nice work, prospective buyer––you really stuck with it. Learning everything there is to know about home buying is a lot, but you’re never really alone. From your local real estate agent to the lender you choose to work with, you’ll be surrounded by support from start to finish. Now get out there and stake your claim!