How does all of this fit in with the “pre-approved” mortgage we hear so much about? It’s definitely helpful to have one, but understand what it really is — or rather, isn’t. A pre-approval is ultimately a letter from a lender that shows you’re qualified to borrow a specific amount of money, which can give you a competitive edge against other bidders.

Even though it’s not the mortgage, per se, it’s a tool that shows you’re serious and qualified to borrow. To that end, some sellers won’t even consider an offer unless it comes with lender pre-approval. Your lender’s inquiry will usually show up on your credit report, so ideally you only want to get it done once. Because pre-approval letters are typically valid for about 60 to 90 days, you want to be careful when you decide to seek out a pre-approval — it should be when you’re serious about the house hunt.

Mortgages are not one-size-fits-all. There are three main factors you should look at when choosing a loan: the term, interest rate and type of loan. All can have a different financial impact in the short and long run.

As a general rule of thumb, the longer the term (or life of the loan), the lower the monthly payment, but the more you’ll pay in total interest. For example, let’s say you have a $150,000 loan with a 3.5 percent interest rate. If you have a 15-year mortgage, your monthly mortgage payment (principal and interest only, excluding taxes, homeowners insurance and PMI) would be $1,072, and the total you’d pay in interest over the life of the loan would be $43,020. If you had a 30-year mortgage, your monthly payment would be $673 — but you’d pay $92,485 in total interest.

It is possible that your interest rate could change over the life of your loan. That’s because you can opt for either a fixed-rate or adjustable-rate mortgage. With a fixed-rate mortgage, you lock in your interest rate for the life of your loan, regardless of whether national interest rates change. This is great if interest rates rise. If they fall, you could refinance to try and take advantage of the lower rates, though there will be additional costs associated with refinancing.With an adjustable-rate mortgage (ARM), your interest rate remains constant for a set period of time, say three, five or seven years.

15-year vs 30-year loans

When that period is up, your interest rate would then adjust. If national rates rise, your mortgage rate can increase; if they fall, your payment could decrease.

Finally, there are three main types of mortgages you can apply for: Conventional loans, Federal Housing Administration (FHA) loans and those that fall under Special Loan Programs. The Consumer Financial Protection Bureau outlines these in detail as well as the pros and cons of each to help you make a more informed decision. But at a high level, here are easy ways to distinguish among them.

Once you’ve made an offer on a home and it’s been accepted, the process of actually paying for the home will begin, and that happens in different phases.

When you make the offer, you’ll need to submit “earnest money” — about 1 to 2 percent of the purchase price of the home. If you back out of buying the home for any reason that isn’t stated in the contract, the earnest money goes to the seller. If the deal closes, it’s then applied to your down payment.The down payment is anywhere from 3.5 to 20 percent (or more) of the purchase price. Putting at least 20 percent down negates the need to purchase PMI, and also helps you get a better interest rate.

So if possible, aim to put down at least 20 percent.

Finally, there are closing costs to consider, and these typically run you between 2 and 5 percent of the purchase price. There are a number of fees involved that you’ll need to pay for, such as appraisals, inspections and taxes.