Mortgage 101: What You Need to Know Before You Buy

Buying a home is exciting, but let’s be honest, the mortgage process? It can feel like a total maze. Confusing acronyms, fluctuating rates, strict requirements, and conflicting advice can leave buyers feeling overwhelmed before they’ve even started house hunting.

That's exactly why I brought one of my go-to lending partners, Jake Kolen from Prosperity Home Mortgage, onto the Keeping Tabs podcast. Jake and I have helped many clients navigate the buying process together, and in this episode, we dove deep into the real conversations buyers need to hear when it comes to financing a home in today’s market.

So, let’s get real about mortgages! 

It Starts with Money — But It’s About More Than That

Let’s face it: you can’t buy a house without a loan unless you're sitting on a pile of cash. And most people aren’t. While realtors like me help you find the right home, it’s the lender who helps make the financing part happen, and choosing the right one can make or break your offer.

Jake put it simply: “Money is what we need to purchase the house. The realtor can find it for you, but we need the lender to back it.”

This is why shopping local matters. Too many people go online and get a generic pre-approval from a big bank or random website. But when you're competing in a hot market — especially around Philadelphia — that pre-approval might not hold much weight. Local lenders who know the market (and the agents on the other side of the table) can give your offer the credibility it needs to win.

Not Ready Yet? That’s OK! Here’s How to Prepare

Not everyone is ready to buy today, and that’s totally normal. Some clients come to me with dreams of homeownership, but their credit isn’t there yet, their employment is too new, or their savings need some time to grow.

Jake calls it “planting seeds.” Some people are ready now. Others need six months or more. The key is to start the conversation early so we can build a plan together.

Pro tip: Don't wait until you're ready to start shopping. Talk to a lender now so you know what needs fixing and so we can celebrate later when you're approved and ready to go.

The Four Quarters Lenders Look At

Jake has a simple but powerful framework: the Four Quarters to the Dollar. If you're thinking about getting a mortgage, these are the four areas lenders will evaluate:

1. Income – Do you have a stable source of income? Salaried employees are straightforward, but hourly workers may need 12 months of consistent hours. Self-employed buyers usually need at least 2 years of returns, though there are now creative programs for that too.

2. Assets – Do you have savings for your down payment and closing costs? Gift funds from family can help, but you’ll need documentation. The more reserves you have, the stronger your application.

3. Debts – Lenders calculate your debt-to-income ratio (DTI) to ensure you’re not over-leveraged. If you make $10,000/month, you can typically have up to $4,500/month in total debts (including your future mortgage payment). Go higher, and you risk being “house poor.”

4. Credit – Your credit score doesn’t need to be perfect, but it needs to be healthy. Keeping credit card balances under 30% of their limits and paying on time are essential. Even small improvements can lead to big savings on your monthly payment.

Example: A 1% difference in your interest rate on a $500,000 loan could save you $200–$250/month — that’s thousands over the life of the loan.

Different Types of Loans: FHA, VA, Jumbo, and Conventional

One of the biggest pain points for buyers is not understanding the types of loans available. Here’s a breakdown of the most common options we see in this market:

• Conventional Loans

These make up about 80% of Jake’s business. They're ideal for buyers with good credit, stable income, and at least 3% down (for first-time buyers). They're also often preferred by sellers because they come with fewer appraisal concerns.

• FHA Loans

FHA loans are government-backed and great for buyers with lower credit scores or smaller down payments. They do come with mortgage insurance and slightly stricter property guidelines, but they’re a fantastic entry point to homeownership.

• VA Loans

Available to veterans and active-duty service members, these loans offer 100% financing with no mortgage insurance. They are a powerful benefit and are great loans for both the buyer and the seller accepting the offer. 

• Jumbo Loans

For homes priced above the conventional loan limit ($806,500 in our area), jumbo loans apply. These require higher credit scores, more reserves, and stricter underwriting, but are essential for luxury buyers.

Pro Tips from the Experts

Here are a few quick takeaways that could save you time, money, and stress:

• Don’t switch jobs right before buying, even for a better one.

• Don’t pay off all your debt thinking it helps. It might actually hurt your credit score.

• Do use your credit cards but keep balances low and pay them off monthly.

• Talk to a lender early, even if you’re just thinking about buying next year.

• Your lender’s reputation matters. A strong lending partner can help your offer stand out.

You Don’t Have to Navigate the Mortgage Maze Alone

Buying a home is a huge step both emotionally and financially. And while the mortgage process can feel overwhelming, the right team can make it a whole lot easier.

I work closely with professionals like Jake because I know how important it is for my clients to feel empowered, educated, and supported from start to finish. Whether you're ready to buy now or just starting to dream, I’d love to help you get there.

Need help figuring out where you stand? Let’s chat. I offer a free, no-pressure consult to talk through your goals and help you create a plan. Schedule now at www.tabithaheit.com