Mortgage FAQ
29 questions answered without jargon. Where a number is involved, the answer links to the calculator that shows it for your situation.
Buying
How much cash do I need to close on a house?
Plan on your down payment plus closing costs, minus any credits, plus escrow deposits. Many buyers also keep reserves for moving, immediate repairs and the first few months of ownership.
Read more →How much house can I afford?
Affordability comes from two directions: what a lender will approve based on income, debts and program guidelines, and what monthly payment you are comfortable with. They are not always the same number.
Read more →What is a pre-approval and why does it matter?
A pre-approval is a lender's review of your documented income, assets and credit that supports a specific loan amount. It helps you shop in the right price range and makes an offer more credible to a seller.
Read more →Should I buy now or wait?
Waiting can help if you save meaningfully more, improve your credit or prices soften — and hurt if prices or rents rise. Since nobody can predict rates or prices, model a few futures instead of one.
Read more →Why would I work with someone who is both a Realtor and a mortgage loan officer?
The property decision and the financing decision affect each other. Working with someone who understands both means the numbers, the offer strategy and the loan structure get discussed together.
Read more →Refinancing
Should I refinance my mortgage?
A refinance can make sense when the monthly savings recover your closing costs well before you expect to sell or refinance again — but you also have to look at what restarting the loan term does to total interest.
Read more →How do I calculate my refinance break-even point?
Divide the out-of-pocket cost of the refinance by the monthly payment savings. The result is the number of months it takes to recover what the refinance cost you.
Read more →How does a cash-out refinance work?
A cash-out refinance replaces your mortgage with a larger one and pays you the difference. It converts equity into cash while increasing your loan balance, payment or term.
Read more →FHA
Is an FHA loan better than a conventional loan?
Neither is universally better. FHA can require less cash upfront and is often more flexible on credit, while conventional financing can cost less over time when your credit and down payment are strong because its mortgage insurance can be cancelled.
Read more →What is FHA MIP and how long does it last?
FHA mortgage insurance has two parts: a 1.75% upfront premium on the base loan amount and an annual premium collected monthly. The annual premium runs 11 years when the original loan-to-value is 90% or less, and otherwise for the loan term.
Read more →Conventional
What is a conventional loan?
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as FHA, VA or USDA. Most conventional loans follow Fannie Mae or Freddie Mac guidelines and conforming loan limits.
Read more →Down Payments
How much down payment do I need to buy a house?
Common minimums are 3% down on some conventional programs and 3.5% down on FHA for qualifying borrowers, though the amount that fits you depends on your cash, your monthly budget and how mortgage insurance is priced for your profile.
Read more →Should I put 20% down on a house?
Putting 20% down reduces the loan amount and generally avoids conventional PMI, but it requires much more cash upfront. Whether it is the better choice depends on your reserves, your monthly budget and what else that cash could do.
Read more →Credit
What credit score do I need for a mortgage?
Program minimums differ and lenders can set stricter requirements. Beyond qualifying, your score affects pricing — especially conventional mortgage insurance premiums and interest rate.
Read more →Does a soft credit inquiry affect my credit score?
A soft inquiry generally does not affect your credit score the way a hard inquiry can. Whether a soft pull is available depends on the lender and the credit service being used.
Read more →Interest Rates
Is a 15-year mortgage better than a 30-year mortgage?
A 15-year loan usually carries a lower rate and much less total interest, but the monthly payment is significantly higher. A 30-year loan costs more over time and buys flexibility in your monthly budget.
Read more →What happens to my payment if interest rates fall 1%?
On a $500,000 loan, roughly each 1% change in rate moves the principal and interest payment by a few hundred dollars a month. The exact amount depends on your loan size and term, so it is worth calculating rather than estimating.
Read more →Should I pay points to buy down my mortgage rate?
Buying points makes sense when you keep the loan long enough to recover the upfront cost through lower payments. Compare the cost of the points against the monthly savings to find the break-even month.
Read more →Should I consider an adjustable-rate mortgage?
An ARM usually starts with a lower fixed period and then adjusts on a schedule within caps. It can fit a short expected time in the loan, and it carries the risk that payments rise later.
Read more →Closing Costs
What are closing costs and how much are they?
Closing costs are the lender, title, government and prepaid items due at closing. On a purchase they commonly run in the range of 2% to 5% of the price, but the actual amount depends on your state, lender and loan.
Read more →How do seller credits work?
A seller credit is money the seller contributes toward your closing costs or, in some cases, a rate buydown. Permitted amounts and uses depend on the loan program and lender rules.
Read more →What is an escrow account on a mortgage?
An escrow account is money your servicer collects with your monthly payment to pay property taxes and homeowners insurance when they come due. Your payment can change when those bills change.
Read more →PMI
What is PMI and when does it go away?
Private mortgage insurance protects the lender on conventional loans above 80% loan-to-value. You can generally request cancellation at 80% and, on a primary residence, it must generally be terminated when the scheduled balance reaches 78% of the original value.
Read more →Home Equity
How does home equity build?
Equity grows two ways: the loan balance falls as you make payments, and the home's value changes with the market. Only the first is under your control.
Read more →Renting
Is it better to buy or rent right now?
It depends mostly on how long you stay, what rent does over that period, and what the home is worth when you sell. Buying tends to look better the longer you stay, because upfront and selling costs get spread over more years.
Read more →Does a fixed mortgage payment really beat rising rent?
The principal and interest portion of a fixed-rate mortgage does not change, but taxes, insurance and HOA dues do, so the total payment drifts up over time. It generally rises more slowly than market rent.
Read more →Mortgage Payoff
How much does paying extra on my mortgage save?
Every extra dollar of principal removes all the future interest that dollar would have accrued, so extra payments shorten the loan and cut total interest. The size of the savings depends on your rate, balance and how early you start.
Read more →Do biweekly mortgage payments help?
Paying half your payment every two weeks results in 26 half-payments, or 13 full payments, a year. That one extra payment shortens the loan — the same effect you get by adding 1/12 of a payment monthly.
Read more →What is a mortgage recast and how is it different from a refinance?
A recast applies a large principal payment and re-amortizes your existing loan to a lower payment, keeping your rate and term. A refinance replaces the loan entirely, with new terms and closing costs.
Read more →Educational only: The calculators and information on this website are for educational and illustrative purposes only. Results are estimates based on the information and assumptions entered and are not a loan offer, commitment to lend, financial advice or guarantee of eligibility, rates, costs or savings. Actual loan terms, rates, fees, mortgage insurance and qualification requirements vary by borrower, property, lender and loan program. Speak with a licensed mortgage professional for personalized information.