What is a mortgage and how does it work?
A mortgage is a loan used to purchase or refinance a home. You agree to repay the borrowed amount (plus interest) over a set period, and the home itself serves as collateral.

What’s the difference between a mortgage pre-qualification and pre-approval?
Pre-qualification is an estimate of what you can borrow based on self-reported financial info. Pre-approval requires documentation and credit checks, giving you a more accurate loan amount and showing sellers you’re a serious buyer.

What credit score do I need to get a mortgage?
Most lenders look for a score of 620 or higher for conventional loans. FHA loans can go lower, but higher credit scores usually mean better interest rates and terms.

What types of mortgages are available?
Common options include Conventional, FHA, VA, USDA (Rural Development), Jumbo, and specialty loans (Renovation, Construction, etc.). Each has different requirements and benefits.

How much down payment do I need for a mortgage?
Down payments vary by loan type. Conventional loans can require 3–20%, FHA loans often 3.5%, and USDA/VA can offer zero down payment for eligible buyers.

How does the interest rate on a mortgage get determined?
Lenders consider market conditions, your credit score, debt-to-income ratio, loan-to-value ratio, and the loan type. A stronger financial profile typically results in a lower rate.

What are closing costs?
These are fees paid at closing—such as lender charges, appraisal costs, title fees, and escrow expenses. They typically range from 2% to 5% of the loan amount.

Should I get a fixed-rate or adjustable-rate mortgage (ARM)?
Fixed-rate mortgages keep your interest rate the same for the loan’s term, giving predictable payments. ARMs start with a lower rate but can fluctuate after an initial fixed period.

What are points and how do they affect my mortgage rate?
Points (also called discount points) are upfront fees you pay to lower your interest rate over the life of the loan. One point usually equals 1% of the loan amount.

What documents do I need to apply for a mortgage?
Typically, you’ll provide recent pay stubs, W-2s or 1099s, tax returns, bank statements, and proof of any other income or assets.

How long does the mortgage approval process take?
The process can take anywhere from 30 to 60 days, depending on your lender, the complexity of your application, and how quickly you provide required documentation.

What is private mortgage insurance (PMI)?
PMI is insurance that protects the lender if you stop making payments. It’s generally required for conventional loans with a down payment of less than 20%.

Can I buy a house with no down payment?
Yes. VA loans (for veterans and service members) and USDA loans (for eligible rural areas) can offer 0% down. You may also explore down payment assistance programs.

How do I calculate how much house I can afford?
A quick approach is to ensure your total monthly mortgage payment (including taxes, insurance, and PMI) doesn’t exceed about 28% of your gross monthly income.

How do I lock in my mortgage rate?
Once you’ve chosen a lender and completed the application, ask to lock in the current rate for a specific period—often 30, 45, or 60 days.

What happens if I lose my job during the mortgage process?
You must notify your lender, as changes in employment or income can affect your loan approval. Your lender may pause or adjust the process until your situation is resolved.

How does refinancing work?
Refinancing replaces your existing mortgage with a new one—often to secure a lower interest rate, change the loan term, or switch loan types (e.g., from ARM to fixed-rate).

When should I refinance?
It makes sense if you can secure a significantly lower rate, reduce your monthly payment, or switch to a more favorable loan type. Factor in closing costs when evaluating potential savings.

How soon can I refinance after buying a home?
Some lenders have no waiting period, but others may require you to wait six months. Check your loan terms or ask your lender for specifics.

What’s the difference between a home equity loan and a HELOC?
A home equity loan provides a lump sum with fixed payments, while a HELOC works like a credit line you can draw from as needed, paying interest only on what you use.

How do I tap into my home’s equity?
You can get a cash-out refinance, a home equity loan, or a HELOC, depending on your needs, credit score, and the amount of equity available.

What is an appraisal, and how does it affect my mortgage?
An appraisal is an independent assessment of your home’s value. Lenders use it to ensure the loan amount aligns with the property value. A low appraisal can limit your borrowing power.

What is an escrow account?
An escrow account holds funds for property taxes and homeowners insurance. Your lender may collect monthly installments to pay these bills on your behalf.

What if the appraisal comes in low?
You can negotiate a price reduction, pay the difference in cash, dispute the appraisal, or switch lenders. A low appraisal doesn’t always derail the deal.

How do property taxes affect my mortgage payment?
Property taxes are typically rolled into your monthly payment via escrow. Higher taxes mean larger monthly mortgage payments.

What are discount points?
Similar to mortgage points, discount points are paid at closing to lower your interest rate. Each point typically costs 1% of the loan amount.

Can I pay off my mortgage early without penalty?
Most modern loans don’t have prepayment penalties, but check your loan agreement. Paying off a mortgage early can save thousands in interest over time.

How does mortgage underwriting work?
Underwriting is the lender’s process of verifying your income, debts, credit, and home value to ensure you meet all loan requirements before final approval.

How do lenders verify my income?
Lenders use pay stubs, W-2s, 1099s, tax returns, and bank statements to confirm consistent earnings or other stable income sources.

What is a jumbo loan?
A jumbo loan exceeds conforming loan limits set by Fannie Mae and Freddie Mac. It’s used to finance higher-priced properties and often has stricter qualifying criteria.

Can I use gift funds for my down payment?
Yes, many loan programs allow gift funds from family or close friends, but you may need a letter stating the funds aren’t a loan.

Are closing costs negotiable?
Some fees (like origination charges) may be negotiable. You can also shop around for services like title insurance and home inspections to reduce overall costs.

What is a mortgage rate buydown?
A temporary buydown (e.g., a 2-1 buydown) lowers your interest rate for the first few years, gradually increasing to the full rate. It can help with lower initial payments.

How do I shop for the best mortgage rate?
Compare loan estimates from multiple lenders, factoring in the interest rate, APR, closing costs, and any discount points or fees.

What is mortgage prepayment?
Paying more than your required monthly mortgage amount—either by making extra payments or larger payments—reduces the principal and total interest paid over time.

How do I avoid paying PMI?
Put at least 20% down on a conventional loan or opt for certain loan programs (like VA) that don’t require mortgage insurance. You can also request PMI removal once you build enough equity.

What is an amortization schedule?
It’s a breakdown of your loan payments over time, showing how each payment is applied to principal and interest until the loan is paid off.

When is the best time to buy a house?
Traditionally, spring and summer see more listings, but also more competition. Winter and fall may offer deals. Ultimately, the best time is when your personal finances are stable.

What’s the difference between interest rate and APR?
Interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus lender fees and other costs, providing a fuller cost picture.

What if I have bad credit?
You can still qualify for certain loans (like FHA) with lower credit scores. Consider improving your credit by paying down debt, correcting errors on your credit report, and making on-time payments.

What is a co-signer, and should I use one?
A co-signer shares responsibility for the loan if you default. This can help you qualify if your own credit or income is insufficient, but it’s a serious financial commitment for the co-signer.

How is the monthly mortgage payment calculated?
It typically includes principal, interest, property taxes, homeowners insurance, and possibly mortgage insurance. Lenders use your loan amount, interest rate, and term to determine the payment.

Are there mortgages for self-employed borrowers?
Yes, many lenders offer bank statement loans or specialized programs. You’ll usually need to provide more documentation, such as two years of business and personal tax returns.

What if I’m a first-time homebuyer with student loans?
Mortgage lenders consider your debt-to-income ratio, including student loan payments. Programs like FHA or down payment assistance can help you qualify despite student debt.

How much can I borrow with an FHA loan?
FHA loan limits vary by county. Check your local limits. This program is designed to help moderate- and lower-income buyers purchase a home with less money upfront.

Can I get a mortgage if I’m retired?
Yes, retirees can qualify using pension, Social Security, investment income, or retirement account distributions. Lenders need proof that income is stable and consistent.

What happens if I miss a mortgage payment?
Missing a payment can lead to late fees and hurt your credit score. If you fall significantly behind, your lender may start foreclosure proceedings.

How do I remove PMI from my mortgage?
Once you’ve paid the loan to below 80% of the home’s value, you can request PMI removal. The lender may require a new appraisal or specific documentation.

What is a VA loan, and who qualifies?
A VA loan is backed by the U.S. Department of Veterans Affairs, offering zero down and low rates for eligible veterans, active-duty service members, and some surviving spouses.

How does the USDA Rural Development loan work?
Designed for buyers in eligible rural areas, it offers zero to low down payments and competitive rates. Income limits and property location requirements apply.

What kind of down payment assistance programs are available?
These vary by state and city, and can include grants, low-interest loans, or forgivable loans. Many target first-time or low- to moderate-income homebuyers.

What is the difference between a second mortgage and a refinance?
A second mortgage (home equity loan or HELOC) adds a new loan on top of the first, while refinancing replaces your existing mortgage entirely.

How can I rebuild my credit to qualify for a mortgage?
Pay bills on time, reduce credit card balances, dispute credit report errors, and avoid new debt. Steady, responsible financial behavior over time is key.

How does a Loan Estimate compare to a Closing Disclosure?
A Loan Estimate shows your estimated rates and closing costs early. A Closing Disclosure is the final breakdown of your actual loan terms, received days before closing.

What’s the difference between a mortgage lender and a mortgage broker?
A lender provides the funds directly. A broker acts as a middleman, shopping multiple lenders on your behalf to find suitable financing.

Can I buy a home while I’m in bankruptcy?
It’s challenging. Most lenders require you to wait until the bankruptcy is discharged or dismissed, with a period of re-established credit.

How long should I keep my mortgage statements?
Keep statements for at least one year. Keep your Closing Disclosure and key documents for as long as you own the property.

How do I choose the right mortgage term (15 vs. 30 years)?
A 15-year mortgage usually offers lower interest rates and faster payoff but higher monthly payments. A 30-year term features lower payments but more total interest.

What is mortgage default?
Default means you’ve failed to make mortgage payments for an extended period, potentially leading to foreclosure.

What are the benefits of a 15-year mortgage?
You pay less overall interest and build equity faster, but the monthly payments are higher compared to a 30-year mortgage.

Should I pay off credit card debt before applying for a mortgage?
Reducing high-interest debt can improve your debt-to-income ratio and credit score, potentially qualifying you for a better mortgage rate.

How does a mortgage recast work?
By making a large principal payment, you can recast your loan for a lower monthly payment based on the reduced balance—usually for a small fee.

What is a balloon mortgage?
You make lower or interest-only payments for a set period, then owe a large lump sum (balloon payment) at the end. It can be risky if you can’t refinance or pay it off.

Can I get pre-approved for a mortgage online?
Yes. Many lenders offer online applications with quick pre-approval options, though you’ll need to provide documentation eventually.

What is mortgage forbearance?
A temporary pause or reduction in your mortgage payments due to financial hardship. Interest still accrues, and missed payments must be repaid later.

How do I dispute an error on my credit report before applying for a mortgage?
Request a free credit report, identify errors, and file disputes online or by mail. Correcting mistakes can boost your credit score.

What is an assumable mortgage?
An assumable mortgage lets a new buyer take over the seller’s interest rate and loan terms. VA and some FHA loans are often assumable, pending lender approval.

Should I use a real estate agent or go it alone?
A real estate agent provides local expertise, guides you through negotiations, and can simplify your search. Agents often have valuable lender contacts, too.

How do I know if I’m ready to buy a home?
Check your savings, credit score, debt-to-income ratio, and job stability. If your finances are in order and you plan to stay put for a while, you may be ready.

How can I avoid foreclosure?
Communicate with your lender immediately if you’re struggling. Options include loan modifications, forbearance, repayment plans, or refinancing if you qualify.

What is earnest money, and how does it affect my mortgage?
Earnest money is a deposit showing you’re serious about buying. It’s typically applied to closing costs or your down payment at closing.

What’s the difference between a short sale and a foreclosure?
In a short sale, the lender allows the home to be sold for less than the mortgage balance. Foreclosure is when the lender seizes the property after missed payments.

What is a rate lock period?
It’s the timeframe (often 30–60 days) during which your interest rate is guaranteed, as long as your credit and application details remain unchanged.

What are the best ways to pay off my mortgage faster?
Make extra principal payments, switch to bi-weekly payments, or consider refinancing to a shorter term. Check for prepayment penalties beforehand.

Can I rent out my house if I have a mortgage?
Generally yes, but review your loan documents for any occupancy clauses. Some loans require you to live in the home for a set period.

How does mortgage insurance work for FHA loans?
FHA loans require an upfront mortgage insurance premium (UFMIP) and monthly mortgage insurance. The monthly premium continues for at least 11 years, depending on factors like down payment.

What is a convertible ARM?
A convertible ARM lets you switch from an adjustable-rate to a fixed-rate mortgage after a certain period, often without refinancing.

How does property insurance affect my mortgage?
Lenders require homeowners insurance to protect their investment. The cost is typically part of your monthly escrow payment, alongside taxes.

What does “loan-to-value ratio” mean?
It compares your loan amount to the home’s appraised value. A lower LTV ratio can lead to better interest rates.

What is the difference between a down payment and earnest money?
Earnest money is the deposit you submit with your offer; the down payment is the lump sum you pay at closing toward the home’s purchase price.

Does my mortgage lender pay my property taxes?
If you have an escrow account, your lender pays taxes and insurance on your behalf. Otherwise, you’re responsible for paying them directly.

What is a mortgage payoff statement?
An official document from your lender stating your remaining balance, per diem interest, and any fees to fully pay off your loan.

How do I budget for home maintenance costs?
A common rule is to set aside 1–3% of your home’s value each year for repairs, upgrades, or general upkeep.

Do all lenders require an escrow account?
Not always. Some conventional loans allow you to waive escrow if you have sufficient equity, but then you must pay property taxes and insurance directly.

What is the difference between conforming and non-conforming loans?
Conforming loans meet guidelines set by Fannie Mae and Freddie Mac, including loan limits. Non-conforming loans, like Jumbo loans, exceed those limits or have other special features.

How do I qualify for a renovation loan?
You need to show creditworthiness, income stability, and a plan for the renovations. The home’s estimated “as-completed” value factors into approval.

What is a construction-to-permanent loan?
A single loan that covers your home’s construction and then converts into a standard mortgage upon completion, streamlining the financing process.

Can I change lenders mid-mortgage process?
It’s possible, but may lead to delays and extra costs. You’d need to reapply and possibly pay for a new appraisal with the new lender.

What should I do if my mortgage application is denied?
Ask why you were denied. Common reasons include credit score or debt-to-income issues. Work to fix these, then reapply or explore alternative loan programs.

How do I compare mortgage loan offers effectively?
Look at interest rates, APRs, points, closing costs, and loan terms side by side. Use the Loan Estimates from each lender for an apples-to-apples comparison.

Is there a penalty for switching homeowners insurance carriers?
Generally no, but check with your insurer for any cancellation fees. If you have an escrow account, notify your lender of the new policy.

What is a mortgage broker fee?
It’s the amount a broker charges for finding and arranging your home loan. It can be paid by the borrower or the lender, depending on the agreement.

How do I know if I’m getting a good mortgage deal?
Compare multiple offers, look at lender reputations, and consider APR, origination fees, and any hidden costs. A good deal balances a low rate with manageable fees.

What does “clear to close” mean?
It indicates you’ve passed underwriting and met all conditions. The lender is ready to finalize your loan, allowing you to schedule the closing date.

What is a loan contingency?
A clause in the purchase agreement stating that the sale depends on you securing financing. If denied a loan, you can back out without losing earnest money.

How much do closing costs typically cost?
They generally range from 2–5% of the loan amount and can include origination fees, title insurance, appraisal fees, and other administrative costs.

What factors affect my mortgage interest rate?
Your credit score, loan type, down payment amount, property type, and current market conditions all influence the rate you’re offered.

Can I still get a mortgage with a past foreclosure on my record?
Yes, but you’ll typically need to wait 2–7 years, depending on the loan program. Rebuilding credit during this period is crucial.

Do I need a lawyer to close on a home?
It depends on state requirements. Some states mandate an attorney, while others do not. Even where it’s optional, an attorney can offer peace of mind.

How can I prepare for my mortgage closing day?
Review your Closing Disclosure, bring valid photo ID, and confirm your final loan details with the lender. Have a certified or cashier’s check if necessary and be ready to sign documents.