Frequently Asked Questions

A general rule is that your monthly housing costs (mortgage, taxes, insurance) shouldn't exceed 28% of your gross monthly income. Your total debt payments shouldn't exceed 36%.

For example, if you earn $6,000/month gross, your maximum housing payment would be around $1,680. Use our Affordability Calculator for a personalized estimate.

Credit score requirements vary by loan type:

• Conventional loans: 620-680 minimum, 740+ for best rates
• FHA loans: 580 with 3.5% down, 500 with 10% down
• VA loans: No VA minimum, but most lenders want 620+
• USDA loans: Typically 640+

Higher credit scores qualify for lower interest rates, potentially saving you thousands over the life of your loan.

Down payment requirements depend on the loan type:

• Conventional: 3-5% minimum (20% to avoid PMI)
• FHA: 3.5% minimum
• VA: 0% (no down payment required)
• USDA: 0% (no down payment required)

While 20% down avoids mortgage insurance on conventional loans, many buyers purchase with less. Use our Down Payment Calculator to see how different amounts affect your loan.

Yes, getting pre-approved is highly recommended before you start looking at homes. Benefits include:

• Know your exact budget before shopping
• Sellers take your offers more seriously
• Faster closing process once you find a home
• Identify and address any credit issues early

Pre-approval typically lasts 60-90 days. Get pre-approved early, but not too early if you're not ready to buy soon.

Pre-qualification is a quick estimate based on self-reported financial information. It's informal and doesn't carry much weight with sellers.

Pre-approval involves a lender verifying your income, assets, credit, and employment. You receive a letter stating how much you're approved to borrow. This is a much stronger position when making offers.

Interest rate is the cost of borrowing the principal loan amount, expressed as a percentage.

APR (Annual Percentage Rate) includes the interest rate plus other costs like mortgage insurance, closing costs, and points, expressed as a yearly rate.

APR gives you a more complete picture of the total cost of the loan. When comparing loans, look at both the interest rate (affects your monthly payment) and APR (total cost).

30-year mortgage:

• Lower monthly payments
• More flexibility in your budget
• Higher total interest paid

15-year mortgage:

• Higher monthly payments
• Lower interest rate (typically 0.5-1% less)
• Build equity faster
• Save significantly on total interest

Choose 30-year if you want lower payments and more flexibility. Choose 15-year if you can afford the higher payment and want to pay off your home faster.

PMI (Private Mortgage Insurance) protects the lender if you default on your loan. It's required on conventional loans when your down payment is less than 20%.

PMI typically costs 0.3% to 1.5% of your loan amount annually. Ways to avoid or remove PMI:

• Put 20% or more down
• Choose a VA loan (no PMI required)
• Request removal when you reach 20% equity
• Automatically removed at 22% equity
• Refinance once you have 20% equity

Mortgage points (also called discount points) let you pay upfront to lower your interest rate. One point costs 1% of your loan amount and typically reduces your rate by 0.25%.

Points make sense if:

• You plan to stay in the home long enough to break even
• You have extra cash after down payment and closing costs
• You want lower monthly payments

Example: On a $300,000 loan, one point costs $3,000. If it lowers your rate from 7% to 6.75%, you save about $50/month. Break-even time: 60 months (5 years).

Yes, but it requires more documentation. Self-employed borrowers typically need:

• Two years of tax returns (personal and business)
• Year-to-date profit and loss statement
• Business license or proof of business
• Higher down payment in some cases

Lenders use your average income over two years, after business deductions. This means your qualifying income may be lower than your gross revenue.

The typical home buying process takes 2-4 months from start to close:

• Pre-approval: 1-3 days
• House hunting: 2-12 weeks (varies widely)
• Making an offer: 1-7 days
• Under contract to closing: 30-45 days

Cash buyers can close faster (2-3 weeks). Financed purchases typically take 30-45 days from contract to closing.

Closing costs are fees paid at the end of the transaction, typically 2-5% of the loan amount. They include:

• Lender fees: Origination, underwriting, processing
• Third-party fees: Appraisal, title insurance, attorney
• Prepaid items: Property taxes, homeowners insurance, prepaid interest
• Government fees: Recording fees, transfer taxes

On a $300,000 home, expect $6,000-$15,000 in closing costs. Use our Closing Cost Calculator for an estimate.

A home inspection is a thorough evaluation of the property's condition by a licensed inspector. They examine:

• Structure and foundation
• Roof and exterior
• Plumbing and electrical systems
• HVAC (heating and cooling)
• Interior conditions

Inspections typically take 2-4 hours and cost $300-$500. Always attend if possible to learn about your future home. See our Home Inspection Checklist for what to look for.

Earnest money is a deposit that shows the seller you're serious about buying. It's held in escrow and applied to your down payment or closing costs at closing.

Typical amounts:

• 1-3% of purchase price is standard
• In competitive markets, buyers may offer more
• Higher earnest money can strengthen your offer

You can get earnest money back if you cancel due to contingencies (inspection, financing, appraisal). You may lose it if you back out without a valid reason.

Selling a house typically costs 8-10% of the sale price:

• Real estate commissions: 5-6% (split between agents)
• Closing costs: 1-3% (title insurance, transfer taxes, attorney)
• Repairs/updates: Varies based on condition
• Staging/photography: $500-$5,000

On a $400,000 sale, expect to pay $32,000-$40,000 in total costs.

Focus on these high-ROI improvements:

• Kitchen updates: Minor remodels return 70-80%
• Fresh paint: Neutral colors, 100%+ ROI
• Curb appeal: Landscaping, front door, 100%+ ROI
• Bathroom updates: New fixtures, 60-70% ROI
• Flooring: Replace worn carpet, 70-80% ROI

Avoid over-improving for your neighborhood. Major renovations rarely return 100% of their cost.

Correct pricing is crucial for a successful sale. Work with your agent to analyze:

• Comparable sales (comps): Similar homes sold in last 3-6 months
• Current competition: Active listings in your area
• Market conditions: Buyer's market vs seller's market
• Your home's condition: Updates, maintenance, unique features

Overpricing leads to longer days on market and often a lower final sale price. Price competitively from the start for best results.