Real Estate Financing 101: Understanding the Basics

By the Nick Phillips Group

If you’re planning to buy a home—whether it’s your first or your fifth—understanding how real estate financing works is essential. We know the process can seem overwhelming at first, especially with all the terms and options out there. That’s why we’re breaking it down into simple, actionable steps. With the right financial strategy, you’ll be able to move confidently toward your next home purchase.

• Learn how mortgages and real estate loans work.
• Understand the difference between loan types and terms.
• Get tips for improving financing outcomes.
• Know what to expect before, during, and after approval.

Real estate financing refers to the methods used to fund the purchase of property, typically through a mortgage loan. This process involves lenders, borrowers, interest rates, and repayment terms—each of which affects your final buying power.

• Down Payment: Typically 10–20% of the purchase price, though some loans allow less.
• Loan Term: Most common options are 15-year or 30-year fixed-rate mortgages.
• Interest Rate: Either fixed or adjustable, based on credit score and market trends.
• Principal & Interest: Monthly payments consist of both loan balance and interest owed.
• Closing Costs: Includes appraisal fees, title insurance, and loan origination charges.

Choosing the right type of loan can affect how much house you can afford and how much you’ll pay over time.

• Conventional Loans: Great for buyers with strong credit and a solid down payment.
• FHA Loans: Government-backed, allowing lower down payments and flexible credit requirements.
• VA Loans: Available to eligible veterans and active-duty military, often with zero down.
• Jumbo Loans: Used for high-value properties that exceed standard loan limits.
• Adjustable-Rate Mortgages (ARMs): Start with lower rates but can increase after an initial period.

Before issuing a loan, lenders evaluate your ability to repay. Knowing how to strengthen your profile gives you a better shot at favorable terms.

• Credit Score: Aim for 700+ for better rates; pay down debts and check for reporting errors.
• Debt-to-Income Ratio (DTI): Lenders prefer this to be under 43%.
• Income Verification: Be ready to show two years of consistent income, especially if self-employed.
• Asset Documentation: Savings and investments help show financial stability.
• Pre-Approval: Strengthens your offer and shows sellers you're ready to move forward.

Understanding the flow of real estate financing makes the journey far less stressful. We guide buyers through every phase—from pre-approval to final closing.

• Pre-Approval: Submit documents, get credit checked, and receive a loan estimate.
• Offer and Appraisal: Once under contract, the lender orders an appraisal to confirm value.
• Underwriting: The lender’s team reviews all information to finalize the decision.
• Closing: Sign paperwork, fund the loan, and receive the keys to your new home.

No, it’s for anyone purchasing property—whether it's your first home, a second home, or an investment.

Jumbo loans are often used for high-value properties, but the best option depends on your financial profile.

Yes—with solid income documentation and tax records, self-employed buyers can absolutely qualify.

Need help navigating real estate financing? We’ve worked with all types of buyers and know how to make the process smooth, efficient, and tailored to your goals. Whether you're buying your first home or your next vacation property, we’ll connect you with trusted lenders and guide you every step of the way.

Working with the Nick Phillips Group means having a team that helps you plan smartly, negotiate confidently, and close with clarity. Reach out today, and let’s talk strategy for your next move.