Where Your Monthly Payment Goes

Each month, you'll make a monthly payment to your lender that will go toward paying back the amount you borrowed (commonly called the principal), plus interest. Your monthly payment may also include mortgage insurance.

Your mortgage statements will show how your payment is broken up. Initially, the bulk of your payment will go toward paying down the interest on the loan, but over time, more of your payment will go to paying down the principal balance.

If you have an escrow account on your loan, part of your payment will go there. The amount of money that's added to your payment for escrow depends on the amount of your taxes and insurance premiums. Your lender will analyze your account each year to make sure they're collecting the appropriate amount of money, and they'll adjust your payment if they're collecting too little or too much.

How to Handle a Missed Mortgage Payment

If you're a few days late on your mortgage payment, you likely won't have to pay a penalty. Most lenders have a grace period – usually around 14 days – when you can make your mortgage payment without an additional late fee. If you fail to pay before the grace period expires, you'll likely pay a penalty. Plus, a late payment will lower your credit score.

Why You Should Work with a Real Estate Agent

A real estate agent can make a big difference in the home buying process, and not just for the reasons you might think.

Find the Right House

First and foremost, your agent will help you find the right house. Agents have access to the MLS database, which means they know what homes are on the market, what features they have, and what they're listed for. While real estate listing sites have this information and can be a good starting point, they're not always 100% accurate or up to date.

Agents have also seen enough homes to know which ones are likely to have expensive problems. Your agent should be able to tell you what to look for and what to steer clear of, which is especially important if you're a first-time home buyer.

Zero in on a Good Area

Finding the right house isn't only about knowing which homes are up for sale. A real estate agent can help you zero in on the location that's right for you. An experienced agent will help you find the very best school districts, amenities and resale values – or whatever is important to you.

Get a Guiding Hand

According to Toney Black, a real estate agent and broker affiliated with Allen Tate Real Estate and Rocket Homes Real Estate LLC, the primary benefit real estate agents provide is consultation. Black talks each of his clients through the home buying process before they even start house hunting so they know what they're in for. While most homeowners will only buy a house a few times in their lifetime, agents go through the buying process with their clients day in and day out.

Manage the Paperwork

Do you know how to write a purchase agreement? Luckily, this isn't something you need to worry about. Your agent will draw up the purchase agreement so all you have to do is read it and sign it. There's a lot of paperwork involved in buying a home, and your agent is there to take care of it.

Make Connections

The buying process can be a whirlwind experience once you've had an offer accepted. There are so many things for you to take care of over the course of about a month, including getting an inspection, arranging movers, shopping for insurance, buying a home warranty and arranging for necessary repairs – and that doesn't even cover getting a mortgage.

Luckily, your real estate agent has seen it all before. They know which inspectors can give you an accurate report, which movers are worthwhile, which insurance companies will overcharge you, and which home warranties have it all. Black even sets up the home inspection for many of his clients. "The only thing that they do themselves is call the insurance company," he said.

Agents have also seen enough homes to know which ones are likely to have expensive problems. Your agent should be able to tell you what to look for and what to steer clear of, which is especially important if you're a first-time home buyer.

How to Find a Real Estate Agent You Can Trust

Agents play a big role in having a successful and stress-free home buying experience, so it's important to find a good one.

Referrals can be a good place to start. Do you have family or friends who recently bought a home in your area? Can your lender give you a referral? At Quicken Loans, we refer our clients to our sister company Rocket Homes, which partners with top-rated agents in all 50 states.

Once you've got a name or two, there are a few ways to know you've got the right person on your side. According to Black, "You definitely want a REALTOR over a regular real estate agent." REALTORS® are real estate agents who are members of the National Association of REALTORS – and that's important because it means they're held to a strict code of ethics.

Black also recommends that you look for a real estate agent who holds a real estate broker license. This can be a great indication that they've gone above and beyond in their education.

More important than all of this, however, is finding an agent who respects you. "You've got a lot of agents that don't carry any designations, but they carry all the characteristics of a good agent. At the end of the day, you want the agent to be trustworthy, loyal and full of respect for the client," said Black.

What to Expect Once You've Found Your Real Estate Agent

Each agent is different, but here's a general picture of what you can expect once you've kicked the house hunting process into motion:

1. You'll spend some time talking about what you're looking for. Your agent will want to see your approval letter. Be prepared to talk about your budget, your target area and the criteria for your home.
2. You'll get to review some listings. Your agent will send you listings of homes you might be interested in. Then, you can let your agent know which ones you want to see.
3. Your agent will set up showings. In most cases, your agent will work fast so you don't miss out on a potential home. That's why it helps to keep an open schedule while you're house hunting, especially if you're in a competitive market.
4. You'll attend showings together until you're ready to make an offer. At that point, your agent will draft the offer letter and cross their fingers for you!

The Three Elements of a Mortgage

Mortgages have three elements: a loan type, a rate type and a term. Knowing how these pieces work together can help you pick the best mortgage for you.

Loan Type

A mortgage's type depends on if a government agency or private investors are involved, as well as the amount of the loan.

FHA loans are the easiest to qualify for. They require a low down payment and FICO® score, but they can cost more over time because they require you to pay a fee called mortgage insurance. You can get an FHA loan from any FHA-approved lender. These loans are insured by the Federal Housing Administration (FHA), which just means that the FHA protects lenders against loss from homeowners who default on their loans.

Conventional loans are a bit harder to qualify for, but they typically cost less over time than an FHA loan. You can avoid paying private mortgage insurance if your down payment is 20% or more. This can save you hundreds of dollars on your monthly mortgage payment.

VA loans are exclusively for veterans, eligible surviving spouses and active-duty service members. VA loans offer the opportunity to buy a home with no down payment or private mortgage insurance.

Jumbo loans are mortgages that exceed the conventional loan limit. This simply means that you'll need a jumbo mortgage if your loan amount is between $484,351and $3 million.

Rate Type

There are two kinds of mortgage rates – fixed and adjustable – and you can pick the type of rate that matches your goals. You can see our current interest rates here.

A fixed-rate mortgage will stay the same for the life of your loan. This option keeps your month-to-month mortgage payment consistent and predictable. This is a great option for homeowners who plan to stay in their new home for a long time and want a regular payment to budget around.

An adjustable-rate mortgage will stay the same for the first 5, 7 or 10 years of the loan. Then, your rates will adjust up or down once per year depending on market conditions. An adjustable-rate mortgage offers the opportunity to get the lowest rate possible and is a good choice for homeowners who plan on moving or refinancing before the initial fixed-rate period ends.

Term

The term is the length of the loan. Most fixed-rate mortgages have 30- or 15-year terms, although you can choose any term from 8 to 30 years with a Quicken Loans YOURgage. Adjustable rate mortgages typically have a 30-year term.

The Many Parts of a Monthly Mortgage Payment

Monthly payments are usually composed of three portions: the principal, the interest, and the taxes and insurance (typically grouped together).

• The principal goes toward paying down the balance of the loan. Any money paid toward your principal increases the amount of equity you have in the property.
• The interest goes to your lender as a fee for borrowing money.
• The taxes and insurance cover your property taxes and homeowner's insurance premiums. This portion is only included in your payment if you have an escrow account, which is a special account that your lender uses to hold the money that's used to pay your property taxes and insurance premiums. With an escrow account, you never have to worry about paying your tax or insurance bills since your lender takes care of that for you.

Deciding How Much to Offer

You've set your budget, you've looked at homes to buy and you've found one you love. So how do you know how much to offer? Staying inside your budget is important, but there's more to getting the house you want than just picking a number. Here are some things to consider when deciding how much to offer:

• Are there comparable homes for sale in the same area? Noting how long they've been on the market can give you an indication of how much competition you're facing. The more competition you have, the stronger your offer should be.
• How long has the house been on the market? If it's been a long time (more than two or three months) or has been listed multiple times, the seller may be more willing to accept an offer below asking price.
• Do you expect to have to compete against other buyers? If the house is in a highly desirable area, there's a chance you could enter a bidding war. You'll need to decide how high you're willing to go before you make your initial offer. If you expect the home to have other bids, it might make sense to come with your strongest offer upfront.
• Does the house require repairs or renovations? To help you stay on budget, keep these future costs in mind.

What to Include in Your Offer

When you're ready to make an offer, your real estate agent can help you get in touch with the seller and submit the offer in writing. Chances are your real estate agent will write the actual offer letter, but here are some details it will include:

• The address of the home
• Your name and the names of anyone buying the house with you, like your spouse
• The amount of your offer
• Any contingencies you're requesting (i.e., conditions that must be met before the sale is a done deal), such as a successful home inspection
• Any seller concessions you'd like (i.e., things you're requesting from the seller), such as cash toward closing costs
• Items you want to include in the sale, like appliances and window treatments
• The amount of your earnest money deposit
• Your approval letter, so the seller will know that you won't run into any financing problems
• The date you expect to close
• The date you want to move into the house
• The deadline to respond to your offer

How to Negotiate the Purchase Price

If the seller accepts your initial offer, then great – you just bought a house! Your lender will send you a Loan Estimate outlining the fees and costs of your loan, but keep in mind these numbers could change up to 10% prior to closing the loan. Before you close, your lender will send you a Closing Disclosure detailing your final numbers so you can see exactly what you're paying for.

If the seller counters your first offer or even just rejects it, how to proceed is up to you. Your agent can get in touch with the sellers to see how willing they are to negotiate, and you may trade counteroffers that negotiate not just the purchase price, but the other parts of your offer like the move-in date.

Negotiating can be stressful, so it's important to keep your goals in mind. Don't forget that it's OK to walk away if you and the seller can't agree. There will always be another house. This is a long-term purchase, so you should take a long-term view.