Mortgage FAQ
Answers to the most common questions about mortgages, rates, down payments, and the homebuying process.
Getting Started
How much house can I afford?
A common guideline is to spend no more than 28% of your gross monthly income on housing costs (PITI: principal, interest, taxes, insurance). With a $7,000/month gross income, that is about $1,960/month for housing. Use our calculator to find your specific number based on your down payment, rate, and local taxes.
What is the difference between prequalification and preapproval?
Prequalification is an informal estimate based on self-reported information with no credit check. Preapproval is a formal process involving a credit pull, income verification, and a written commitment from the lender. Sellers strongly prefer preapproval letters. Always get preapproved before making offers.
How long does it take to buy a house from start to finish?
From first looking to closing, expect 3-6 months. The preparation phase (saving, credit improvement, preapproval) takes 1-3 months. House hunting varies widely. Once under contract, closing takes 30-45 days. Streamlined processes (VA IRRRL, FHA Streamline) can close faster.
Do I need a real estate agent to buy a home?
While not legally required, a buyer's agent provides market expertise, negotiation skills, and guidance through the complex buying process. Buyer's agents are typically paid from the seller's commission, so their services are effectively free to the buyer. Always interview 2-3 agents before choosing.
Mortgage Rates
What is a good mortgage rate in 2026?
In 2026, average 30-year fixed rates are around 6.85%. Rates of 6.5% or below are considered excellent. Your personal rate depends on credit score (740+ gets the best), down payment (20%+ helps), loan type (VA is lowest), and lender. Shopping 3-5 lenders can save 0.5% or more.
How are mortgage rates determined?
Mortgage rates closely follow the 10-year Treasury bond yield with a typical spread of 1.5-2.5%. They are influenced by Federal Reserve policy, inflation expectations, employment data, and global economic conditions. Your individual rate is further affected by credit score, down payment, loan type, and loan amount.
Should I wait for rates to drop before buying?
Timing the market is extremely difficult. If you are financially ready and find the right home, buying now and refinancing later if rates drop is often the best strategy. Meanwhile, you are building equity and locking in a purchase price. The saying "marry the house, date the rate" reflects this approach.
What is the difference between interest rate and APR?
The interest rate is the cost of borrowing the principal loan amount. APR (Annual Percentage Rate) includes the interest rate plus lender fees, points, and other charges, giving a more complete picture of total borrowing cost. APR is always higher than the interest rate. Use APR to compare loan offers from different lenders.
Down Payments & Closing Costs
How much do I need for a down payment?
It depends on the loan type: VA and USDA loans require 0% down. FHA loans need 3.5% (with 580+ credit score). Conventional loans start at 3% down. Putting 20% down eliminates PMI. On a $350,000 home, down payments range from $0 (VA/USDA) to $70,000 (20% conventional). Many states offer $5,000-$25,000+ in down payment assistance.
What are closing costs and how much should I expect?
Closing costs are fees paid to finalize the mortgage, typically 2-5% of the loan amount. On a $300,000 loan, expect $6,000-$15,000. Major costs include origination fees, appraisal, title insurance, attorney fees, recording fees, prepaid taxes, and insurance. Some can be negotiated, and sellers can often contribute toward buyer closing costs.
Can I buy a house with no money down?
Yes, through VA loans (eligible veterans/military) or USDA loans (eligible rural/suburban areas with income limits). Some state and local programs also offer 100% financing or grants covering the entire down payment. Even with zero-down programs, budget for some closing costs (though these can sometimes be covered by seller concessions or lender credits).
Loan Types
What is the difference between FHA and conventional loans?
FHA loans are government-insured with lower credit (580+) and down payment (3.5%) requirements but require MIP for the life of the loan. Conventional loans need higher credit (620+) but PMI can be removed at 80% LTV. If your credit is 700+, conventional is usually cheaper overall. If your credit is below 680 or you have limited savings, FHA may be easier to qualify for.
Should I choose a 30-year or 15-year mortgage?
A 30-year mortgage has lower monthly payments (~$2,295/month on $350K at 6.85%) but costs more in total interest (~$476K). A 15-year has higher payments (~$3,000/month at 6.20%) but saves ~$311K in total interest. Choose 30-year for budget flexibility, 15-year for faster payoff. You can always make extra payments on a 30-year to pay it off faster while keeping the lower required payment as a safety net.
What is a jumbo loan?
A jumbo loan exceeds the conforming loan limit ($766,550 in most areas for 2026). Jumbo loans are needed for higher-priced homes and cannot be sold to Fannie Mae/Freddie Mac. They typically require 700+ credit scores, 10-20% down payments, and 6-12 months cash reserves. Rates are slightly higher but competitive for well-qualified borrowers.
Credit & Qualification
What credit score do I need to buy a house?
Minimum scores by loan type: Conventional 620, FHA 580 (3.5% down) or 500 (10% down), VA no official minimum (lenders typically require 580-620), USDA 640, Jumbo 700+. A score of 740+ qualifies for the best rates. Each 20-point improvement can save 0.125-0.25% on your rate.
How do I improve my credit score before buying?
Pay credit card balances below 30% of limits (below 10% is ideal) — this can boost scores 20-40 points within 30 days. Do not open new accounts or close existing ones. Dispute any errors on your credit reports. Become an authorized user on a family member's old, well-managed card. Start these steps 3-6 months before applying for a mortgage.
What is debt-to-income ratio and why does it matter?
DTI is total monthly debts divided by gross monthly income. Front-end DTI (housing only) should be under 28-31%. Back-end DTI (all debts) should be under 43-50%. Example: $2,500 total debts / $7,000 income = 35.7% DTI. Lowering DTI by paying off debts or increasing income directly improves your mortgage qualification.
PMI & Insurance
What is PMI and how can I avoid it?
Private Mortgage Insurance (PMI) is required on conventional loans with less than 20% down. It costs 0.5-1.5% of the loan annually ($130-$390/month on a $315,000 loan). Avoid PMI by putting 20% down, using a VA loan (no PMI), or using an 80-10-10 piggyback loan structure. PMI can be removed once you reach 80% LTV and automatically terminates at 78% LTV.
What is the difference between PMI and MIP?
PMI is for conventional loans and can be removed once you reach 20% equity. MIP (Mortgage Insurance Premium) is for FHA loans and includes an upfront premium of 1.75% plus an annual premium of 0.55%. If you put less than 10% down on an FHA loan, MIP lasts for the entire loan term. The only way to eliminate FHA MIP is to refinance into a conventional loan.