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You borrow part of a home's price and pay it back monthly with interest, and the lender holds a lien on the property until the loan is paid off. Each payment splits between interest and principal, with interest highest at the start. If you stop paying, the lender can foreclose. Most loans are fixed-rate or adjustable-rate, usually with terms of 15 or 30 years.

Lenders look at your income, debts, credit and down payment. As a rough example, under a 36% total-debt limit, a household with $8,000 of gross monthly income and $500 of other debts could spend about $2,380 a month on housing. After allowing for taxes and insurance, that supports a certain loan amount at today's rates. Get preapproved to find out exactly what you can borrow.

On $5,000 a month, the 28% guideline gives about $1,400 for housing. If taxes and insurance cost $350, that leaves about $1,050 for principal and interest. At 6.5% over 30 years, that supports a loan of about $166,121. Your own figure depends on your rate, debts, location and down payment. A larger down payment increases the price you can reach.

It's one at or below what lenders offer similar borrowers today, for the same term and points. Rates change daily, so compare several quotes at about the same time. Don't judge a rate on its own: a lower rate might come with extra points. The APR helps with this comparison, because it spreads most fees across the term of the loan.

Each month, the lender charges interest on your remaining balance: one-twelfth of the yearly rate. The rest of your payment reduces the balance. On a $400,000 loan at 6.5%, the first month's interest is about $2,167, and only about $362 goes to principal. That split shifts in your favor each month, as the balance falls.

Many conventional lenders look for about 620 or higher, and better scores get better rates. FHA loans can allow a score as low as 580 with 3.5% down, or 500 with 10% down, though lenders can set stricter rules. VA and USDA loans have no government-set minimum, but lenders usually have their own. Check your credit reports before you apply.

Preapproval means a lender has reviewed your income, assets and credit and has said in writing how much it may lend, subject to final checks. It's stronger than prequalification, which usually relies on what you tell the lender. Sellers often expect a preapproval letter with an offer. Multiple mortgage credit checks within a short window are generally treated as a single inquiry when scored.

Conventional loans aren't backed by the government and often require private mortgage insurance with less than 20% down. FHA loans suit lower credit scores or smaller down payments, and aren't limited to first-time buyers. VA loans serve eligible veterans and service members, often with no down payment. USDA loans help buyers in eligible rural areas. Jumbo loans exceed conforming limits.

Putting down 20% avoids private mortgage insurance on a conventional loan and lowers your payment, but many buyers put down far less. Some loans allow 3% or 3.5%, and VA and USDA loans can allow none. A smaller down payment keeps more cash on hand, but it adds to your cost and to the risk of owing more than the house is worth. Keep an emergency fund after closing.

Refinancing replaces your loan with a new one, usually to get a lower rate, change your term or take out cash. You'll pay closing costs, so divide those by your monthly savings to find your break-even point. If costs are $6,000 and you save $200 a month, you'd break even in 30 months. Starting a new 30-year term can raise your lifetime interest, even at a lower rate.

Common sources include banks, credit unions, online lenders and mortgage brokers, who shop among several lenders on your behalf. Check a lender's license in the NMLS Consumer Access database. For loan estimates, ask about rate, points, fees, and how long your rate lock lasts. Always compare the Loan Estimate form, which is standardized, so offers are easy to compare.