Mortgage Financing From Start to Finish: A Guide for Buyers and Sellers

Mortgage Basics — What You're Actually Borrowing

A mortgage has a few key components: principal (the amount borrowed), interest rate (fixed or adjustable), loan term (typically 15 or 30 years), and the monthly payment which usually combines principal + interest + property taxes + insurance, collectively known as PITI. Loan-to-value ratio (LTV) measures the loan amount against the property value. A higher down payment means a lower LTV, easier approval, better rates, and avoidance of private mortgage insurance (typically required when LTV exceeds 80%). Understanding PITI matters for sellers too — a buyer who is pre-approved for a $600,000 loan may have a maximum monthly PITI that limits what they can actually afford depending on property tax rates in your area. High property taxes in some New Jersey and New York municipalities can meaningfully reduce effective purchasing power.

The Mortgage Broker vs. Going Direct to a Bank

A mortgage broker shops multiple lenders to find the best rate and terms. Brokers are typically paid by the lender, not by the borrower, and can access loan products not available to consumers directly. Going direct to a bank or credit union may be faster if you already have a relationship, but you only see that one lender's rates and products. Neither approach is universally better. The right move is usually to get quotes from both and compare total loan costs (not just the interest rate — origination fees, points, and other costs add up).

The Pre-Approval Process — Do This Before Anything Else

Pre-approval is a meaningful financial commitment by a lender, based on actual document review. It involves income documentation (pay stubs, W-2s, tax returns), asset documentation (bank statements, investment accounts), a credit check, and a debt-to-income calculation. The output is a pre-approval letter stating the maximum loan amount and loan type you qualify for. Sellers will ask for this before seriously considering any offer — and they should. A standard pre-approval takes 1–3 business days and is typically valid for 60–90 days before requiring renewal. Do not confuse pre-approval with pre-qualification. Pre-qualification is a quick, unverified estimate based on numbers you self-report. It is not a financial commitment from a lender and sellers should not treat it as one.

Common Mortgage Types

Conventional loans are the standard mortgage, typically requiring 620+ credit score and 3–20% down. FHA loans are government-backed, allowing 580+ credit and 3.5% down, but they require mortgage insurance and have stricter property condition requirements (which sellers should be aware of). Sellers accepting FHA offers should also be aware that FHA appraisers evaluate both value and property condition. If the home has peeling paint, exposed wiring, a leaking roof, or other safety or habitability issues, an FHA appraisal may require repairs before the loan closes — creating potential delays or pre-closing repair obligations for the seller. VA loans are for eligible veterans and service members: no down payment required, no PMI. Jumbo loans are for amounts above conforming limits ($766,550 in most areas for 2024, higher in high-cost markets like NYC) and have stricter requirements.

From Pre-Approval to Clear to Close

Once an offer is accepted: (1) the buyer submits a formal loan application, (2) the lender orders an appraisal, (3) underwriting begins. The lender verifies all documents and evaluates risk, typically 2–4 weeks, (4) conditional approval is issued. The lender approves subject to specific conditions like additional documents or repairs, (5) all conditions are met and the lender issues 'clear to close,' (6) the closing disclosure is delivered 3 business days before closing per federal TRID rules, and (7) closing happens — funds disburse, title transfers, keys change hands. For a complete week-by-week timeline of the full contract-to-close process including inspection, appraisal, and closing day, see our article From Accepted Offer to Closing Day in this hub.

What Sellers Should Know About Financed Offers

When evaluating a financed offer, look at: the lender's name (a recognizable national lender or local bank is generally safer than an unknown), the pre-approval letter date (should be recent — within 60 days), the down payment percentage (larger = stronger buyer), the loan type (conventional generally has fewer property restrictions than FHA), and the financing contingency language (how long does the buyer have to secure financing?). Cash offers eliminate financing risk entirely — they typically close faster but not always at a higher price.

What This Means in New York, New Jersey, and Florida