Frequently asked questions
Plain-English answers to 147 of the financial planning questions we hear most often. Use the search bar in the top menu to jump straight to one.
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Showing 49–72 of 147 in Home Buying
Do biweekly or extra principal payments really pay off my mortgage faster?
Yes – any payment above what's required goes straight to principal and shortens the loan. With biweekly payments you make half your payment every two weeks, which works out to 26 half-payments, or 13…Read more
What is recasting a mortgage and how is it different from refinancing?
Recasting means you make a large lump-sum payment toward principal, and the lender re-amortizes the remaining balance over your existing term – lowering your monthly payment while keeping the same rat…Read more
How does a mortgage escrow account work?
An escrow (or impound) account lets your lender collect a slice of your property taxes and homeowners insurance with each monthly mortgage payment, then pay those bills on your behalf when they come d…Read more
Why are my early mortgage payments almost all interest?
It's how amortization works: interest is charged on your remaining balance, which is largest at the start, so early payments are mostly interest with only a sliver going to principal. As the balance s…Read more
What's the difference between mortgage pre-qualification and pre-approval?
Pre-qualification is a quick, informal estimate based on numbers you tell a lender – it gives a rough sense of what you might borrow but carries little weight with sellers. Pre-approval is the real th…Read more
What is earnest money and how does making an offer work?
When you make an offer, you submit a written purchase agreement with your price, financing terms, contingencies, and a closing timeline, plus earnest money – a good-faith deposit (often 1–3% of the pr…Read more
Do I really need a home inspection before buying?
Almost always, yes. A home inspection is a few-hundred-dollar visual exam of the home's major systems – roof, foundation, electrical, plumbing, HVAC, and more – done after your offer is accepted but b…Read more
What happens if the appraisal comes in below my offer in a hot market?
If the appraisal is lower than your contract price, your lender will only finance based on the appraised value, leaving an appraisal gap you must cover. Say you offered $520,000 but it appraises at $5…Read more
What are contingencies in a home purchase offer?
Contingencies are conditions in your contract that must be met or you can exit without losing your earnest money. The common ones are the financing contingency (your loan must be approved), the apprai…Read more
What does closing day look like and what are closing costs?
At closing you sign the final loan and ownership documents, pay your remaining funds, and receive the keys; the deed and mortgage are then recorded and the home is yours. Closing costs are the fees to…Read more
What is title insurance and why do I pay for it?
Title insurance protects against ownership problems from the home's past – an unknown lien, a forged signature, an unpaid contractor, a missed heir, or a clerical error that could challenge your right…Read more
How do property taxes work and will mine go up after I buy?
Property tax is an annual local tax based on your home's assessed value times a local rate, and it funds schools, roads, and services. After you buy, many jurisdictions reassess the home – often near…Read more
What does homeowners insurance actually cover?
A standard homeowners policy covers four main things: damage to the dwelling itself, your personal belongings, liability if someone is hurt on your property, and additional living expenses if you're d…Read more
How much should I budget each year for home maintenance?
A common rule of thumb is to set aside about 1% of your home's value per year for maintenance and repairs – so $4,000 annually on a $400,000 home, or roughly $330 a month. Older homes, larger lots, an…Read more
How does a cash-out refinance work?
A cash-out refinance replaces your existing mortgage with a larger one and hands you the difference in cash, tapping the equity you've built. If your home is worth $500,000 and you owe $300,000, you m…Read more
Should I use a HELOC to pay for renovations?
A home equity line of credit (HELOC) lets you borrow against your equity as needed, like a credit card secured by your home, with a variable rate and a draw period before repayment begins. It's flexib…Read more
What does it cost to sell a home?
Selling typically costs around 6–10% of the sale price once everything is tacked on. The biggest piece has traditionally been agent commission – historically about 5–6% split between the buyer's and s…Read more
How does the capital gains exclusion work when I sell my home?
When you sell your primary residence, the home-sale exclusion lets you avoid capital gains tax on up to $250,000 of profit if you're single, or $500,000 if married filing jointly. To qualify, you gene…Read more
Should I buy a new home before selling my current one?
Buying before selling lets you move once and avoid temporary housing, but it can mean carrying two mortgages at the same time, which is risky if your old home lingers on the market. Selling first give…Read more
What is an assumable mortgage and when does it help?
An assumable mortgage lets a qualified buyer take over the seller's existing loan – including its rate, balance, and remaining term – instead of getting a new mortgage. When the seller's locked-in rat…Read more
Is it better to buy discount points or make a larger down payment?
Both use cash to lower costs, but they do different things. Discount points buy down your interest rate, cutting your monthly payment and lifetime interest, with a break-even that pays off only if you…Read more
How much interest will I really pay over the life of my mortgage?
Far more than most people expect. On a $400,000 30-year loan at 7%, the total interest can exceed $550,000 – meaning you repay well over double what you borrowed. The total depends heavily on your rat…Read more
Does it make sense to refinance from a 30-year to a 15-year mortgage?
Refinancing from a 30-year into a 15-year can be a powerful move: 15-year loans carry lower rates, and the shorter term slashes total interest while building equity fast. The trade-off is a higher mon…Read more
How do I get rid of PMI after I gain equity in my home?
If you put less than 20% down, you're likely paying private mortgage insurance (PMI), but it doesn't have to last forever. On conventional loans, you can request cancellation once your balance reaches…Read more
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