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Getting a Mortgage

Unless you win the lottery or come into a large inheritance, borrowing money to buy a home is a given. With all of the options and complexities surrounding mortgages today, it’s vital to know all the ins and outs before you sign on the dotted line.

Things to Think About When Considering a Mortgage

  1. Make a budget: Compare income and expenses and figure out how much you can afford for your monthly payment and down payment.
  2. Do some research: Learn about mortgage options through reliable sources such as certified professionals and trusted websites. You may be eligible for free homeownership counseling or even grants to help make home buying affordable. Learn more in Preparing to Buy a Home.
  3. Compare rates and costs: Check out current ESL mortgage rates.
  4. Know where you stand: Your credit reports, scores, and financial health are keys to mortgage eligibility. Visit Budgeting and Managing Credit to learn more about where you stand.
  5. Apply for the loan: Once you feel your finances are in order, you can apply for the mortgage.
    • When it comes to finding the right place to obtain a mortgage, it’s important to go with a trusted source. Asking friends and family members is a good start, but it’s also important to do your own research. As always, it’s essential to compare products from several lending institutions before making a final decision.
    • The process of closing a mortgage loan will likely take 45 to 60 days. During this time it is important to recognize that changes to employment, income, and liabilities may impact your ability to close. Your income, employment, and credit are checked throughout the process. As a result it’s important to ensure a consistent credit profile. Try not to make any large purchases, like a car, or new appliances and furnishings for your home. Large deposits or withdrawals from your bank accounts may require explanations and documented proof of source.

Understanding Mortgage Fees & Costs

The cost of a mortgage can typically be broken into three categories: rates, points, and fees:


  • Percent interest that is charged for the loan.
  • Rates will vary depending upon amount borrowed, type of mortgage, term, and credit score.
  • Types of rates include fixed or variable.
  • APR = Annual Percentage Rate. Takes into account the rate, points, and fees averaged over a year.


  • Option of prepaying some of the interest on your mortgage in return for a lower interest rate.
  • The cost of one point is equal to 1% of the mortgage amount. For each point purchased, the interest rate is typically reduced by .125% to .25%.
  • It’s best to ask for the actual dollar amount you will have to pay for points. Paying points can potentially save you more in the long run.


  • Costs that are paid for various activities in loan processing and closing.
  • Examples of common fees include origination, broker, transaction, settlement, and appraisal. Some fees are paid when you apply and some when you close on the loan.
  • Fees may vary by lender and type of loan.

The components of your mortgage payment include:

  • Principal and interest from your loan.
  • Mortgage Insurance Premium (MIP)—which may be required for some loans.
  • Taxes and homeowners insurance (If escrowed).

Which Type of Mortgage is Right for You?

  • If you anticipate your income will remain the same, it may be better to consider a fixed-rate mortgage.
  • If interest rates are expected to increase significantly, a fixed-rate mortgage may be a better route.
  • An ARM may be a good choice if low payments in the short term are your main goal.
  • If you don't plan to live in the property long enough for the rates to rise, an ARM could be a good option

Take a look at the mortgage calculators in the Resources & Tools section for additional guidance.

Types of Mortgage Loans

When it comes to mortgages, there’s a myriad of mortgage loan types to choose from. Some are basic like the fixed-rate mortgage, while others are very complex. Visit our Mortgage Solutions page for an overview of mortgage options offered by ESL. Here’s a quick “cheat sheet” to help you get a handle on what’s what:

Fixed-Rate Mortgage

  • This is the most common type of mortgage loan.
  • The monthly principal and interest remains the same during the life of the loan.
  • The monthly payment stays the same, which makes budgeting easier—note that monthly escrow and insurance may vary.
  • The actual rate of interest you'll pay depends on: Term, Points, and Credit.
  • Mortgage terms vary from 10 to 30 years—check out current ESL mortgage rates.
  • When interest rates are high, qualifying for a loan is more difficult because the payments are less affordable.

Home Possible®

This mortgage offers outstanding flexibility and options to meet a variety of borrowers' needs, including first-time homebuyers. Flexibility in sources of funds and lower down payments make this a popular homebuying solution.

Adjustable-Rate Mortgage

As the name suggests, the interest rate for an adjustable-rate mortgage can increase or decrease over time.

  • The monthly payments fluctuate as the interest rate increases or decreases.
  • The initial rate on an ARM is often lower than fixed-rate loans.
  • There is typically a limited period of time during which the initial interest rate remains fixed—anywhere from one month to ten years.
  • After the fixed-rate period, the interest rate adjusts at a pre-arranged frequency tied to a defined market index.

FHA Mortgage

These mortgages are backed by government insurance that is funded into the loan for the life of the loan. Qualifying first-time homebuyers can be good candidates for FHA loans because the down payment requirements are small and credit score requirements are less.

VA Mortgage

Veterans and, in certain cases, spouses of deceased veterans are eligible for this type of loan (other requirements vary). These loans can be very beneficial because the borrower does not need a down payment. The loan is guaranteed by the Department of Veteran Affairs and funded by a conventional lender.

Interest-Only Mortgage

"Interest-only mortgage" is somewhat misleading as these loans are not really interest only; meaning the borrower never pays principal on the loan. For some, there’s an option to make an interest-only payment that’s available for a limited time. For others, they are indeed interest only and require a balloon payment at the end of the loan.

Option ARM Mortgage

These loans can be quite complex. The interest rate fluctuates periodically and borrowers can choose from a variety of payment options and index rates. Be careful with the minimum payment option, which can result in a payment that’s less than the interest causing the principal balance to increase.

Mortgage Plus Home Equity Combos

These mortgages actually consist of two loans: a first and second mortgage. They can be adjustable or fixed-rate or a combination of the two. Borrowers take out two loans when the down payment is less than 20% to avoid paying private mortgage insurance.

HomeOne ℠

This affordable mortgage option is for first-time homebuyers who have limited funds for a down payment. Buyers are required to receive homebuyer education prior to closing.