Mortgage FAQ

A typical down payment ranges from 3% to 20% of the home's price, depending on the loan type. FHA loans allow as little as 3.5% down; conventional loans can start at 3% for first-time buyers. VA and USDA loans offer no-down-payment financing for eligible buyers. Down Payment Assistance (DPA) programs are also available in many areas. These are grants, forgivable loans, or second mortgages that can help cover your down payment and sometimes closing costs. Eligibility is typically based on income, purchase price, and location. Consult your mortgage professional to see what programs you may qualify for. You can also browse our Down Payment Assistance directory and zero-down loan programs database to explore options in your area.

There are four main types. Conventional loans are not government-backed. They typically require a credit score of 620 or higher and no longer require mortgage insurance once your equity reaches 20%. FHA loans are insured by the Federal Housing Administration, allowing down payments as low as 3.5% with credit scores as low as 580, but require mortgage insurance premiums (MIP) for the life of the loan in most cases. VA loans are guaranteed by the Department of Veterans Affairs for eligible veterans, active-duty service members, and surviving spouses. They require no down payment and no PMI. USDA loans are backed by the U.S. Department of Agriculture and offer no-down-payment financing for eligible buyers in rural and suburban areas who meet income limits. Each loan type has different eligibility requirements, costs, and benefits. Ask your lender which is the best fit for your situation. You can compare payment scenarios across all four loan types using our mortgage calculators.

Many lenders look for a credit score of 620 or higher, but better rates are usually available to those with scores above 740.

Closing costs include lender fees (such as origination and appraisal), title-related fees (such as title insurance and survey), and prepaid items (such as property taxes and homeowners insurance). They typically range from 2% to 5% of the purchase price. When you apply for a mortgage, you'll receive a detailed estimate of your total costs.

Yes, and ideally before you start looking at homes. Pre-approval is different from pre-qualification: pre-qualification is a quick estimate based on self-reported information, while pre-approval involves a full credit pull, income verification, and asset documentation. In a competitive market, sellers often won't consider an offer without a pre-approval letter. Many lenders now offer digital pre-approval within 24 to 48 hours. Shop at least two or three lenders so you can compare rates and fees before committing.

After you apply, the lender prepares your file and submits it to an underwriter for review. Underwriting typically takes 3 to 7 business days once your complete package is submitted, though it can take longer during busy periods or if additional documentation is requested. Once approved, your loan processor will contact you to confirm approval and coordinate the remaining steps: appraisal, flood certification, title commitment, and final closing preparation. The full process from application to closing typically runs 30 to 45 days.

Lenders or Banks do not require home inspections. However, most contracts require a home inspection during the option period. This inspection is a detailed examination of the home you're about to purchase. The inspector will test appliances and plumbing, check for termites, examine the foundation, and more. While not required, it's highly recommended. Your real estate agent should assist you with this.

The APR is disclosed on the Truth in Lending Statement and is a complex calculation of interest and other costs. Simply put, the APR is not your interest rate, and your payment is not calculated by the APR. Instead, the APR includes the interest rate, closing costs, and some other fees, all calculated into a single number. It's a measure of your total cost. Your payment and actual interest are based on your interest rate.

The lender or bank is responsible for ordering the appraisal. Lenders typically do not accept appraisals ordered by other parties. The appraiser will inspect the property and produce a comprehensive valuation report. This process usually takes 7 to 10 days.

The loan processor is assigned once your loan is approved. They help collect any remaining documents needed before closing and follow up on the appraisal and title commitment. If they call you, it's usually to introduce themselves or request documentation.

Delays often stem from homeowners insurance. Many customers wait too long to secure it. Lender or Bank won't send closing documents until they have an insurance binder. Please begin this process early. Also, provide any requested documents quickly. Underwriters may need items not collected at application. Even though closing typically takes about 30 days, the Lender will need everything required including proof of insurance 7 days in advance of the closing date.

Final figures come from the title company in a document called the Closing Disclosure (CD), which must be provided to you at least three business days before closing. Your lender will give you a preliminary estimate beforehand covering closing costs, taxes, insurance, and your down payment, which is useful if you need to liquidate assets or transfer funds. Title companies require certified funds via cashier's check or wire transfer; contact your title company early to confirm their preference and wiring instructions.

Timing mortgage rates is like timing the stock market: very difficult to get right, and waiting can cost you in other ways. If rates fall after you buy, you can refinance. If home prices rise while you wait, you may pay more even at a lower rate. The better question is: do you have stable income, enough saved for a down payment and closing costs, and do you plan to stay in the home at least 3 to 5 years? If yes, the math usually favors buying. Use a mortgage calculator to see what the monthly payment looks like at today's rate. That number matters more than the rate itself.

PMI is insurance that protects the lender, not you, if you default on the loan. It's typically required on conventional loans when your down payment is less than 20% of the purchase price. PMI costs roughly 0.5% to 1.5% of the loan amount per year, added to your monthly payment. You can avoid it by putting 20% or more down, or by using a piggyback loan structure (commonly 80/10/10, where a second loan covers part of the down payment). If you already pay PMI, you can request cancellation once your loan balance reaches 80% of the home's original value, and it must automatically terminate at 78% under the Homeowners Protection Act. Note: FHA loans use a different type of mortgage insurance called MIP (Mortgage Insurance Premium). It includes an upfront fee at closing plus an annual premium that in most cases continues for the life of the loan, regardless of your equity.

A rate lock guarantees your interest rate for a set period, typically 30 to 60 days, while your loan is processed. This protects you from rate increases between application and closing. Most lenders offer free locks for 30 to 45 days; longer locks may carry a fee or a slightly higher rate. Lock your rate once you are under contract and have selected a lender. If rates drop after you lock, ask your lender about a float-down option, which lets you capture a portion of the decrease, but not all lenders offer this, so ask upfront.

You may not make your first payment for 30 to 60 days after closing. Mortgage interest is paid in arrears, meaning you pay for the prior month. For example, if you close on May 15, you'll pay interest from May 15 to May 31 at closing. Your first payment would be due July 1, covering June's interest. You'll receive monthly statements or coupons which will direct you where to make your payments. The first payment details will be in your closing package.

Not necessarily. Zero down payment does not mean zero cash to close. Even with a VA or USDA loan, you still owe closing costs (lender, title, and appraisal fees) and prepaid items (first-year homeowner's insurance, escrow reserves for property taxes and insurance, and interim interest). Some programs also carry a fee, such as the VA funding fee or the USDA guarantee fee, although these can often be financed into the loan. You can reduce the cash that comes out of your own pocket by negotiating for the seller to pay closing costs and prepaids (limits depend on the loan type), by pairing your loan with a down payment assistance program, and by using gift funds from an allowed source. Whether you can reach zero depends on your loan program, your eligibility, and the market. To estimate your own number, use the Total Mortgage Payment & Cash to Close Calculator. For the step-by-step strategy, see Module 2: Saving for Homeownership (Stacking Programs to Minimize Cash to Close) and my blog post on stacking down payment assistance programs and strategies to lower a buyer's out-of-pocket cash, including how I bought my first home with only $654 out of pocket.

The calculator uses county-wide average rates for the state and county you select, applied to the purchase price you enter. These are averages, not figures for a specific home. Your actual property tax depends on the assessed value, exemptions such as a homestead exemption, and local taxing districts. Your actual insurance premium depends on the insurer, the home's age, construction and location, and your coverage choices. Treat the result as a starting estimate and replace it with real quotes as you get them.

Closing costs and carrying costs vary by county. Transfer taxes, recording fees, title charges, property tax rates, and insurance costs are not the same everywhere, and some counties have special rules that the calculator notes below your results. Selecting your county gives a closer estimate than a statewide figure.

Cash to close is your down payment plus estimated closing costs and prepaid items. Closing costs include lender and title charges and county transfer and recording fees. Prepaid items include 30 days of interim interest, 3 months of property tax escrow, and 14 months of homeowner's insurance escrow. Program fees such as the VA funding fee, the USDA guarantee fee, and the FHA upfront mortgage insurance premium are shown as financed into the loan where they can be. Seller credits, gift funds, and down payment assistance are not subtracted automatically, so if you expect any of them, subtract them from the result.

A Loan Estimate reflects one lender's fees, one title company, and your specific property. Lenders also tend to quote certain fees on the high side because federal rules limit how much those fees can increase between the estimate and closing. The calculator uses typical actual costs rather than a lender's cushioned quote, so its closing costs often come in a little lower than a Loan Estimate. See our accuracy study for how the calculator compared to two verified lender quotes in one test scenario.

The public calculator does not have separate tax or insurance fields. It calculates both from the county averages and the purchase price you enter. If you already have a real tax bill or insurance quote, compare it to the estimate in the results and adjust your own budget by the difference. Your lender's Loan Estimate shows the actual figures used for your loan. You can run your numbers in the Total Mortgage Payment & Cash to Close Calculator.

The fee and rate data behind the calculator is reviewed and updated periodically as new information becomes available. Results are estimates for planning, not a loan offer or a quote, and they can differ from your final figures depending on your lender, title company, property, and credit profile.