Mortgage Tips & Options
Everything you need to understand your financing options, get the best rate, and walk into closing with confidence.
How a Mortgage Works
A mortgage is a loan you use to buy a home. The home itself serves as collateral — meaning if you stop making payments, the lender can take the property back.
Every payment covers two things: principal (paying down your balance) and interest (the lender's fee). Early in the loan, most of your payment goes to interest. Over time, more goes toward principal — this is called amortization.
Think of your mortgage payment like rent — except part of it builds equity in your home. After 30 years, you own it outright. After 30 years of renting, you own nothing.
Key Terms
Loan Types Compared
Side-by-side comparison of every major loan type available to Utah buyers.
| Attribute | Conventional Most Common | FHA First-Time Friendly | VA Best for Veterans | USDA Rural Areas | Jumbo Luxury Homes | Utah Housing Utah Specific |
|---|---|---|---|---|---|---|
| Min. Down | 3–5% | 3.5% | 0% | 0% | 10–20% | 0% w/ DPA |
| Min. Credit | 620+ | 580+ | No minimum | 640+ | 700+ | 620+ |
| PMI / MIP | If <20% down | Required (MIP) | None | Guarantee fee | Varies | Varies |
| Best For | Good credit, stable income | First-time buyers, lower credit | Veterans, active military | Rural/suburban Utah areas | Luxury homes >$766K | UT buyers needing DPA |
| Key Note | Most common loan. No government backing. Best rates for strong borrowers. | Government-backed. Easier to qualify. MIP required for life of loan in most cases. | Best terms available. $0 down, no PMI, competitive rates. Use it if you qualify. | $0 down for eligible rural areas. Income limits apply. Check USDA maps for eligibility. | For homes above conforming loan limits. Stricter requirements, larger reserves needed. | UHC FirstHome/HomeAgain programs with down payment assistance. Pair with FHA or conventional. |
* Credit score minimums vary by lender. Your specific situation may qualify for better or different terms.
Fixed vs. Adjustable Rate
Fixed-Rate
Most popular choice
Your interest rate stays the same for the entire term — 15 or 30 years. Principal + interest payment never changes.
Adjustable-Rate (ARM)
Use with caution
Fixed rate for an initial period (e.g., 5 or 7 years), then adjusts annually based on market indexes. Initial rates are usually lower.
Rate Impact on a $500K Loan (30-Year Fixed)
| Rate | Monthly P&I | Total Paid | Total Interest |
|---|---|---|---|
| 5.5% | $2,839 | $1,022,040 | $522,040 |
| 6.5% | $3,160 | $1,137,600 | $637,600 |
| 7.5% | $3,497 | $1,258,920 | $758,920 |
* P&I only. Excludes taxes, insurance, and PMI. Illustrative purposes.
What Affects Your Rate
Lenders calculate your rate based on risk. Here's what moves the needle — and how much.
Rate drop saves ~$150/mo on a $500K loan
Credit score threshold for the best available rates
Down payment that eliminates PMI entirely
Credit Score
The single biggest factor. A score of 760+ gets the best rates. Going from 620 to 740 can save 0.5–1.5% on your rate.
Down Payment
More down = less lender risk = lower rate. Putting 20% down eliminates PMI and often qualifies for better pricing.
Loan Term
15-year loans have lower rates than 30-year. Higher monthly payments but significant long-term savings.
Loan Type
Conventional often has the lowest rates for strong borrowers. VA loans are excellent. FHA and jumbo can vary.
Debt-to-Income (DTI)
Lenders want total debts below 43–50% of gross income. Lower DTI = better rate and easier approval.
Market Conditions
Rates move daily based on the Fed, inflation, and bond markets. You can't control this, but you can time your rate lock.
Down Payment Strategies
How much you put down affects your rate, monthly payment, and PMI. Here's the full picture.
Utah Housing Corporation (UHC) offers DPA grants and second loans to cover 3.5–6% of the purchase price. Available to first-time and some repeat buyers. Ask your lender if you qualify.
Getting Pre-Approved
Pre-approval is a lender's written commitment to loan you a specific amount, based on a full review of your finances. It's different from pre-qualification, which is just a rough estimate.
In Utah's competitive market, sellers expect a pre-approval letter with every offer. Without one, your offer may not even be considered.
Pre-approval typically takes 1–3 business days. It's free and is one of the most important early steps.
Pre-qualification is a quick self-reported estimate — it holds little weight with sellers. Pre-approval involves a full credit pull and document review. Always get a full pre-approval before making offers.
Documents You'll Need
Closing Costs
Budget 2–3% of the loan amount for closing costs. On a $500K purchase, that's typically $8K–$15K+.
In some market conditions, you can negotiate for the seller to cover some or all of your closing costs. Your agent can advise when this makes sense.
Some lenders offer credits (slightly higher rate) to reduce your upfront cash. Useful if you're short on cash to close.
Within 3 days of applying, your lender must provide a Loan Estimate. Review it carefully and compare it across lenders — some fees are negotiable.
Tips to Save Money
Small moves can save you tens of thousands over the life of your loan.
Shop at Least 3 Lenders
Rate differences between lenders can add up to tens of thousands. Get quotes from a bank, credit union, and a mortgage broker. Compare APR, not just rate.
Lock Your Rate at the Right Time
Once under contract, ask about a rate lock. Locks last 30–60 days. If rates are rising, lock early. Ask about a float-down option if they're falling.
Pay Down Debt Before Applying
Paying off credit cards and installment loans lowers your DTI and can boost your credit score — both directly improve your rate.
Don't Open New Credit
Avoid applying for credit cards, car loans, or any debt while house hunting. New inquiries and accounts can lower your score and affect approval.
Consider Buying Down Your Rate
Paying points upfront (1 point = 1% of loan) permanently lowers your rate. If you stay 7+ years, this can save significantly. Ask your lender to run the math.
Refinance When Rates Drop
If rates fall 0.75–1%+ after you close, refinancing may make sense. Rule of thumb: recoup closing costs in under 2–3 years.
Have Mortgage Questions? We're Here to Help.
We work with trusted Utah lenders and can connect you with someone who'll find the right loan for your situation.
