Mortgage & Loan
Questions, Answered.

The minimum depends on the loan type. FHA loans require 3.5% (with a 580+ credit score). Conventional loans can go as low as 3%. VA loans require 0% for eligible veterans.

Putting down less than 20% typically requires PMI (private mortgage insurance), which adds $50–$200/month to your payment. A 20% down payment eliminates PMI and lowers your monthly costs significantly.

FHA loans accept scores as low as 580 (3.5% down) or 500 (10% down). Conventional loans require 620+. For the best rates, you need 740 or higher.

A 0.5% rate difference on a $400,000 mortgage saves over $40,000 over 30 years. It's worth spending 6–12 months improving your score before applying.

A common guideline is the 28/36 rule: housing costs no more than 28% of gross monthly income, total debt no more than 36%. But this is just a starting point.

Consider your job stability, savings after the down payment, and other financial goals. Many people buy at the top of their approval amount and end up house poor.

Pre-approval is significantly stronger. Pre-qualification is a quick estimate based on self-reported information — sellers don't take it seriously. Pre-approval involves a credit check and document verification.

In competitive markets, offers without pre-approval letters are often ignored. Get pre-approved before house hunting, not after you find something you love.

Closing costs are fees paid at the end of a real estate transaction — typically 2–5% of the loan amount. They include lender fees, appraisal, title insurance, attorney fees, and prepaid items.

On a $400,000 home, budget $8,000–$20,000. Always request a Loan Estimate within 3 days of applying — lenders are legally required to provide this breakdown.

DTI (Debt-to-Income ratio) is monthly debt payments divided by gross monthly income. It's one of the most important numbers in any loan application.

Most conventional lenders want total DTI below 43%. FHA allows up to 50%. Example: $3,000 debt ÷ $8,000 income = 37.5% DTI.

PMI protects the lender if you default, required when down payment is under 20%. Costs 0.5–1.5% annually — on a $400,000 loan, that's $2,000–$6,000/year.

Request removal once you reach 20% equity. By law (Homeowners Protection Act), lenders must cancel PMI automatically at 22% equity.

An ARM has an initial fixed period (5, 7, or 10 years) with a lower rate, then adjusts annually based on a market index. Your payment can increase significantly after the fixed period.

ARMs make sense if you plan to sell before the adjustment period. If you're staying long-term, a fixed rate gives more predictability.

Late fee after the grace period. Credit report hit after 30 days. Foreclosure possible after 90+ days.

Contact your lender immediately if you're struggling — they have hardship programs and would rather work with you than foreclose.

When you can lower your rate by at least 0.5–1% and plan to stay long enough to recoup closing costs. Calculate your break-even point: closing costs ÷ monthly savings = months to break even.

If your rate is below 6%, investing extra money historically outperforms early payoff. If your rate is above 7%, paying it down is closer to a guaranteed return.

Prioritize high-interest debt and emergency fund first. The math often favors investing — but the psychological peace of a paid-off home has real value too.

Lenders prefer 2+ years of stable employment. W-2 employees have the easiest path. Self-employed need 2 years of tax returns. Recent job changers can qualify if they're in the same field earning the same or more.

Yes — what matters is how it affects your DTI ratio. Lenders count your monthly student loan payment against your income. FHA uses 0.5% of the total balance for $0 income-driven payments. Conventional uses the actual payment or 1% of balance, whichever is greater.

Most lenders require: 2 years of tax returns, 2–3 months of pay stubs, 2–3 months of bank statements, W-2s for 2 years, and photo ID.

Self-employed borrowers also need profit/loss statements. The more organized your documents, the faster the process — delays almost always come from missing paperwork.