Mortgage FAQ: Your Home Loan Questions Answered

Most conventional loans require a minimum credit score of 620, but you can qualify for FHA loans with scores as low as 580 (or even 500 with a larger down payment). However, the real question isn't just "Can I qualify?" but "What rate will I get?"

Your credit score dramatically impacts your interest rate. The difference between a 680 and 740 score could cost you tens of thousands over your loan's life.

Contrary to popular belief, you don't always need 20% down. Many programs allow as little as 3-5% down for qualified buyers, and VA loans offer 0% down for eligible veterans.

That said, your down payment amount affects your monthly payment, interest rate, and whether you'll pay PMI (private mortgage insurance). The "right" amount depends on your financial situation and goals.

Pre-qualification is an informal estimate based on information you provide. Pre-approval is a formal evaluation where a lender verifies your income, assets, and credit to determine exactly how much they'll lend you.

In competitive markets, sellers often won't consider offers without pre-approval. But not all pre-approvals are equal—some lenders are more thorough than others, which can lead to surprises during underwriting.

Each loan type has different requirements, benefits, and costs:

Conventional: Not government-backed, typically requires higher credit but offers more flexibility. FHA: Government-insured, lower credit requirements, smaller down payments but requires mortgage insurance. VA: For veterans and military, 0% down, no PMI. USDA: For rural properties, 0% down for qualified buyers.

Most buyers don't realize which programs they qualify for—or which would actually save them the most money.

A 15-year mortgage has higher monthly payments but significantly lower total interest. A 30-year mortgage offers lower monthly payments and more flexibility. The "right" choice depends on your income stability, other financial goals, and risk tolerance.

Some buyers benefit from a 30-year loan but make extra payments to pay it off faster, maintaining flexibility while reducing interest.

An ARM offers a lower initial rate that adjusts after a set period (typically 5, 7, or 10 years). They can make sense if you plan to move or refinance before the rate adjusts, but they carry risk if your income doesn't increase or rates rise significantly.

Many buyers choose ARMs without understanding the worst-case scenarios or comparing their true costs to fixed-rate options.

The typical mortgage process takes 30-45 days from application to closing. However, this can be shorter or longer depending on your loan type, lender efficiency, how prepared you are, and whether any issues arise during underwriting.

Delays often happen because buyers don't provide complete documentation upfront or unexpected credit/income issues surface mid-process.

Closing costs typically range from 2-5% of your loan amount and include appraisal fees, title insurance, origination fees, prepaid taxes, and more. The exact amount varies by location, loan type, and lender.

Many buyers are shocked by their closing costs because they don't understand which fees are negotiable, which are inflated, and which can be rolled into the loan or covered by the seller.

Private Mortgage Insurance (PMI) protects the lender if you default. It's typically required on conventional loans when you put down less than 20%. PMI can add $50-200+ to your monthly payment.

You can avoid PMI by putting 20% down, using a piggyback loan, choosing a VA loan (if eligible), or in some cases, paying a higher interest rate instead.

Mortgage rates fluctuate daily based on market conditions, your credit score, loan type, and down payment. A rate lock guarantees your rate for a set period (typically 30-60 days) while your loan processes.

The timing of your rate lock can save or cost you thousands. Lock too early and you might miss a rate drop; wait too long and rates could rise before closing.

Yes, but it's more complex. Self-employed buyers need to provide 2 years of tax returns, profit/loss statements, and sometimes additional documentation. Lenders calculate your income differently than W-2 employees, often resulting in lower qualifying amounts than expected.

Many self-employed buyers get denied or offered less favorable terms simply because they don't know how to properly document their income.

Yes, but your debt-to-income ratio (DTI) matters. Lenders typically prefer your total monthly debts (including the new mortgage) to be below 43-50% of your gross income. Student loans, car payments, and credit cards all count against you.

Strategic debt management before applying can significantly increase your buying power.

You can still buy a home, but you'll need to wait a certain period (typically 2-7 years depending on loan type and circumstances) and rebuild your credit. The waiting period varies significantly based on the loan program and whether there were extenuating circumstances.

Many people wait longer than necessary because they don't understand the specific requirements or how to rebuild credit effectively.

Refinancing typically makes sense when you can lower your rate by at least 0.75-1%, want to switch from an ARM to fixed-rate, need to eliminate PMI, or want to tap into home equity. However, you need to factor in closing costs and how long you plan to stay in the home.

The "break-even" calculation is crucial but often misunderstood by homeowners.

A rate-and-term refinance simply changes your interest rate or loan term. A cash-out refinance lets you borrow against your home equity and receive cash at closing, but typically comes with a higher rate.

Cash-out refis can be smart for debt consolidation or home improvements, but they're often misused or come with terms that aren't in the homeowner's best interest.