Frequently Asked Questions

First, assess your finances. Check your credit score, review your savings for a down payment, and calculate how much you can afford monthly. Use our affordability calculator to get an estimate.

Next, get pre-approved for a mortgage. This involves submitting financial documents to a lender who will tell you how much they're willing to lend you. Pre-approval shows sellers you're serious and can actually afford their home.

Then, find a real estate agent. A good agent knows the local market, can identify properties that meet your needs, and will negotiate on your behalf. They're typically paid by the seller, so there's no cost to you as a buyer.

Finally, start house hunting! Make a list of must-haves versus nice-to-haves, and be prepared to view multiple properties before finding the right one.

It depends on your loan type:

• Conventional loans: Can be as low as 3% for first-time buyers, though 5-20% is more common
• FHA loans: Require 3.5% down with a credit score of 580+, or 10% if your score is 500-579
• VA loans: 0% down payment for eligible veterans and active military
• USDA loans: 0% down payment for homes in eligible rural areas

The trade-off: While smaller down payments make homeownership more accessible, they usually mean:

• Higher monthly payments
• Private mortgage insurance (PMI) if under 20%
• Potentially higher interest rates
• Less equity in your home from day one

The timeline varies by stage:

Pre-approval: 1-3 days once you submit your documents

House hunting: This varies widely! Some buyers find their home in a few weeks, others search for several months.

Offer to closing: Typically 30-45 days

• Offer acceptance: Immediate to 1-2 days
• Home inspection: 7-10 days after offer acceptance
• Appraisal: 1-2 weeks
• Mortgage underwriting: 2-3 weeks
• Final walkthrough and closing: Last few days

Potential delays: Issues found during inspection, appraisal coming in low, problems with the title search, or delays in mortgage approval can extend the timeline.

First-time buyer tip: Give yourself extra time and don't commit to moving dates until you have a confirmed closing date!

Closing costs are fees you pay at closing to complete your home purchase. They typically range from 2-5% of the home's purchase price.

Common closing costs include:

• Loan origination fee: 0.5-1% of loan amount
• Appraisal fee: $300-$600
• Title search and insurance: $500-$3,500
• Home inspection: $300-$500
• Attorney fees: $500-$1,500

Ways to reduce closing costs:

• Shop around for lenders and compare fees
• Negotiate with the seller to cover some costs

Credit score requirements vary by loan type:

• Conventional loans: Minimum 620, but 740+ gets you the best rates
• FHA loans: 580 for 3.5% down, or 500-579 for 10% down
• VA loans: No official minimum, but most lenders want 620+
• USDA loans: Typically 640 minimum

How credit score affects your mortgage:

760-850:	Excellent - Best rates available
700-759:	Good - Competitive rates
660-699:	Fair - Slightly higher rates
620-659:	Below average - Higher rates, limited options
Below 620:	Poor - Very limited conventional loan options

Improving your credit score:

• Pay all bills on time (payment history is 35% of your score)
• Keep credit card balances below 30% of limits
• Don't close old credit cards (length of history matters)
• Avoid opening new credit accounts before buying
• Check your credit report for errors and dispute them

Important: Even a 20-point difference in your credit score can mean thousands of dollars over the life of your loan. If your score is below 700, consider waiting a few months to improve it before applying.

DTI (Debt-to-Income) ratio is one of the most important numbers in mortgage approval. It shows lenders what percentage of your monthly income goes toward debt payments.

How to calculate DTI:

DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100

What counts as debt:

• Future mortgage payment (including taxes and insurance)
• Car loans and leases
• Student loans
• Credit card minimum payments
• Personal loans
• Alimony or child support

What doesn't count: Utilities, phone bills, groceries, insurance (except mortgage insurance)

DTI requirements by loan type:

• Conventional loans: Prefer 43% or lower (some allow up to 50% with strong credit)
• FHA loans: Up to 43%, sometimes 50% with compensating factors
• VA loans: No strict limit, but typically 41%
• Ideal DTI: Below 36% gives you the most options and best rates

Example calculation:
Monthly income: $6,000
Car payment: $400
Student loans: $200
Credit cards: $100
Future mortgage: $1,500
DTI = ($2,200 ÷ $6,000) × 100 = 37% ✓ Good!

Use our affordability calculator to see your DTI and how much you can afford.

Fixed-Rate Mortgages (FRM)

Pros:

• Payment never changes - easy to budget
• Protected from rising interest rates
• Peace of mind for long-term homeowners
• Simple to understand

Cons:

• Higher initial interest rate than ARMs
• No benefit if rates drop (unless you refinance)
• Less flexibility

Best for: Buyers planning to stay in the home 7+ years, those who want predictable payments, or when rates are historically low.

---

Adjustable-Rate Mortgages (ARM)

Pros:

• Lower initial interest rate (often 0.5-1% less than fixed)
• Lower payments during initial fixed period
• Good if you plan to move or refinance soon
• Can benefit if rates go down

Cons:

• Payment can increase significantly after adjustment period
• Unpredictable long-term costs
• More complex terms (caps, margins, indexes)
• Risk if you can't refinance or sell before adjustment

Best for: Buyers planning to move within 5-7 years, those expecting income to increase, or when fixed rates are very high.

---

Common ARM types:

• 5/1 ARM: Fixed for 5 years, then adjusts annually
• 7/1 ARM: Fixed for 7 years, then adjusts annually
• 10/1 ARM: Fixed for 10 years, then adjusts annually

Bottom line: Fixed-rate is safer and simpler. Choose ARM only if you're confident you'll move or refinance before the rate adjusts, and make sure you can afford the maximum possible payment. Learn more about different loan types.

PMI (Private Mortgage Insurance) is insurance that protects the lender - not you - if you can't make your mortgage payments. It's typically required when you put down less than 20% of the home's purchase price.

How much does PMI cost?
Typically 0.5% to 1% of the loan amount per year, paid monthly. On a $250,000 loan, that's $104-$208 per month, or $1,250-$2,500 per year.

When is PMI required?

• Conventional loans with less than 20% down
• Refinances where you have less than 20% equity

PMI vs. MIP (FHA loans):
FHA loans have their own version called MIP (Mortgage Insurance Premium). Unlike PMI, MIP typically stays for the life of the loan if you put down less than 10%, or for 11 years if you put down 10% or more.

How to remove PMI:

• Automatic removal: When you reach 22% equity based on the original amortization schedule
• Request removal: When you reach 20% equity, contact your lender to request PMI cancellation
• Home value increase: If your home appreciates significantly, you can get a new appraisal to prove you have 20% equity
• Refinance: If your home value increased or you've paid down enough principal, refinance to a new loan without PMI

Ways to avoid PMI:

• Save for a 20% down payment
• Use a VA loan (if eligible) - no PMI required
• Consider a "piggyback loan" (80-10-10) where you take a second mortgage for 10%
• Ask about lender-paid PMI (LPMI) where you pay a higher interest rate instead

The trade-off: While PMI adds to your monthly cost, it allows you to buy a home sooner rather than waiting years to save 20%. For many first-time buyers, especially in appreciating markets, the benefits of buying sooner outweigh the cost of PMI.

Calculate how PMI affects your payment with our mortgage calculator.