Question 1

Can the seller pay my closing costs, and how much are they allowed to contribute?

Accepted Answer

Yes, sellers can contribute toward your closing costs through what are called seller concessions, but each loan type caps how much. Conventional loans generally allow 3% of the price with less than 10% down, rising to 6% with 10% to 25% down. FHA allows up to 6%, VA allows up to 4% plus normal closing costs, and USDA allows up to 6%. Concessions can only cover closing costs and prepaids, not your down payment, and cannot exceed your actual costs. In a buyer's market, asking for concessions is of

Question 2

How does an adjustable-rate mortgage adjust, and what do the numbers like 7/6 ARM mean?

Accepted Answer

An ARM has a fixed introductory rate, then adjusts periodically based on a market index plus a set margin. In a 7/6 ARM, the rate is fixed for the first 7 years, then adjusts every 6 months after that. The new rate equals the index (today usually SOFR) plus the lender's margin, subject to caps. Caps are shown as three numbers, such as 2/1/5, limiting the first adjustment, each later adjustment, and the lifetime increase. ARMs make sense if you are confident you will sell or refinance before the

Question 3

What credit score do I need for the best mortgage rate, and how much does it matter?

Accepted Answer

For conventional loans, the best pricing generally starts around a 760 to 780 FICO score, with rates improving in tiers as your score rises. FHA loans allow scores as low as 500 to 580 but at higher cost. The difference is significant: the CFPB and Fannie Mae note that a borrower with a score in the low 600s can pay noticeably more in rate and mortgage insurance than one above 740, adding tens of thousands over the life of the loan. Before applying, pay down credit card balances to lower utiliza

Question 4

How do lenders calculate my debt-to-income ratio, and what counts as debt?

Accepted Answer

Lenders divide your total monthly debt payments by your gross monthly income to get your DTI. Counted debts include the new mortgage payment (principal, interest, taxes, insurance, HOA), plus minimum payments on credit cards, auto loans, student loans, personal loans, and any child support or alimony. Not counted are utilities, groceries, insurance premiums outside escrow, or streaming subscriptions. Student loans in deferment are still often counted using a percentage of the balance. Convention

Question 5

What is a builder rate buydown, and how is a 2-1 buydown different from paying points?

Accepted Answer

A temporary buydown lowers your interest rate for the first year or two, then it returns to the note rate. In a 2-1 buydown, your rate is 2 percentage points lower in year one and 1 point lower in year two before settling at the full rate in year three. Builders and sellers often fund these to move inventory, effectively subsidizing your early payments through an escrow account. Unlike discount points, which cut the rate permanently, a buydown is temporary and does not change your actual loan ra

Question 6

Should I get pre-approved by multiple lenders, and does it hurt my credit?

Accepted Answer

Yes, getting pre-approved by several lenders is smart because it reveals real rate and fee differences, and it barely affects your credit. Under FICO and VantageScore models, all mortgage-related hard inquiries within a shopping window, typically 14 to 45 days, are grouped and counted as a single inquiry. So you can safely collect Loan Estimates from three to five lenders without stacking damage on your score. Compare the interest rate, the lender fees in section A, and the total cash to close.

Question 7

What is a mortgage recast, and how does it lower my payment without refinancing?

Accepted Answer

A recast, or re-amortization, lets you make a large lump-sum payment toward principal, after which the lender recalculates your monthly payment over the remaining term at your existing rate. Because the balance is smaller, your payment drops, but your interest rate and loan term stay the same. It is far cheaper than refinancing, often just a few hundred dollars, and requires no new credit check or appraisal. Recasting is ideal after a windfall, a bonus, or the sale of a previous home, especially

Question 8

How do lenders treat RSU, bonus, and commission income when qualifying me for a mortgage?

Accepted Answer

Lenders want proof that variable income is stable and likely to continue, so they usually average it over the past two years. Bonus and commission income generally needs a two-year history documented on W-2s and tax returns, and they use the average, not your best year. RSU income is trickier: some lenders count vested RSUs if you have a consistent multi-year vesting history and a schedule showing future vests, but many exclude it entirely, which can hurt tech workers with equity-heavy pay. Ask

Question 9

Can I get a mortgage as an H-1B or other visa holder, and what do lenders require?

Accepted Answer

Yes, visa holders including H-1B, L-1, and green-card applicants can get conventional and FHA mortgages, and many lenders treat them the same as citizens for pricing. You will need a valid Social Security number, a work-authorization document such as an EAD or a visa with an I-797 approval, and typically a two-year US work and credit history. Some lenders want to see that your visa is unlikely to lapse soon, so a recently renewed or multi-year status helps. You do not need a green card. Build a

Question 10

What is a piggyback 80/10/10 loan, and how does it help me avoid PMI?

Accepted Answer

An 80/10/10 loan splits your financing into a first mortgage for 80% of the price, a second mortgage or HELOC for 10%, and a 10% down payment from you. Because the first mortgage stays at 80% of value, you avoid private mortgage insurance, which normally kicks in below 20% down. This can be cheaper than paying PMI, and it also keeps a jumbo-sized purchase within the conforming limit on the first loan. The trade-off is that the second loan usually carries a higher, sometimes variable, rate that y

Question 11

How does lender-paid mortgage insurance compare to borrower-paid PMI?

Accepted Answer

With borrower-paid PMI, you pay a monthly premium that you can cancel once you reach 20% equity, which under federal law the servicer must automatically drop at 22%. With lender-paid mortgage insurance (LPMI), the lender covers the insurance in exchange for charging you a permanently higher interest rate. LPMI lowers your monthly payment slightly compared to a high PMI premium and the interest may be tax-deductible, but the higher rate never goes away, even after you cross 20% equity. Borrower-p

Question 12

What is a temporary rate buydown funded by the seller, and do I still qualify at the higher rate?

Accepted Answer

A seller-funded temporary buydown uses seller concession money to lower your interest rate for the first one to three years, reducing your early payments while you settle into homeownership. The funds sit in an escrow account and supplement your monthly payment during the buydown period. Critically, lenders qualify you at the full, un-bought-down note rate, so you must show you can afford the eventual payment, not just the discounted one. This structure is popular when sellers prefer offering a

Question 13

How do I get rid of FHA mortgage insurance, since it does not drop off like conventional PMI?

Accepted Answer

On most FHA loans originated after 2013 with less than 10% down, the annual mortgage insurance premium lasts the entire life of the loan and cannot be canceled by reaching 20% equity, unlike conventional PMI. If you put down 10% or more, the MIP drops off after 11 years. The main way to eliminate lifetime FHA MIP is to refinance into a conventional loan once you have at least 20% equity and solid credit, which removes the premium entirely. Run the numbers first, since refinancing means new closi

Question 14

What is an appraisal gap, and how do I cover one if the home appraises low?

Accepted Answer

An appraisal gap is the difference between your accepted offer price and a lower appraised value. Lenders lend based on the lower of price or appraisal, so if a $500,000 home appraises at $480,000, the lender bases your loan on $480,000 and you must cover the $20,000 gap in cash on top of your down payment. Options include paying the difference out of pocket, renegotiating the price with the seller, disputing the appraisal with additional comps, or walking away if you have an appraisal contingen

Question 15

Is it better to make a larger down payment or keep more cash and buy points?

Accepted Answer

It depends on your goals. A larger down payment reduces your loan balance, can eliminate PMI at 20%, and lowers both your payment and lifetime interest, but it ties up cash you cannot easily access. Buying points lowers your rate but only pays off if you keep the loan past the break-even point. Generally, prioritize reaching 20% down to kill PMI first, then keep a healthy emergency fund before spending extra on points. If you are cash-constrained, a smaller down payment plus keeping reserves is

Question 16

How much should I keep in cash reserves after closing, and why do lenders check?

Accepted Answer

Cash reserves are liquid assets left after your down payment and closing costs, measured in months of your future mortgage payment (principal, interest, taxes, insurance). Conventional loans on a primary residence may require none to two months, while jumbo loans, investment properties, and second homes often require six to twelve months. Lenders check reserves because borrowers with a cushion are far less likely to default if income drops. Retirement accounts, brokerage balances, and savings ca

Question 17

What is the difference between origination fees, discount points, and lender credits on my Loan Estimate?

Accepted Answer

Origination fees are what the lender charges to process and underwrite your loan, listed in section A of the Loan Estimate; they cover the lender's work regardless of your rate. Discount points are optional prepaid interest you pay to buy down your rate, expressed as a percentage of the loan, where one point equals 1% of the loan amount. Lender credits are the opposite: money the lender gives you toward closing costs in exchange for a higher rate. When comparing lenders, look at all three togeth

Question 18

Can I use a 401(k) loan versus an IRA withdrawal for my down payment, and what are the trade-offs?

Accepted Answer

Both are possible but come with different rules. A 401(k) loan lets you borrow up to 50% of your vested balance or $50,000, whichever is less, and you repay yourself with interest; there is no tax or penalty unless you leave your job and cannot repay, in which case the balance becomes a taxable distribution. A Roth IRA lets you withdraw your contributions anytime tax- and penalty-free, and first-time buyers can take up to $10,000 of earnings penalty-free, per the IRS. Traditional IRA withdrawals

Question 19

What is a no-closing-cost mortgage, and is it actually free?

Accepted Answer

A no-closing-cost mortgage does not eliminate closing costs; it shifts them. The lender either rolls the costs into your loan balance or, more commonly, charges a higher interest rate and uses lender credits to cover the fees at the table. You pay less cash upfront but more over time through the higher rate or larger balance. This structure makes sense if you are short on cash, plan to sell or refinance within a few years, or expect rates to fall soon so you would refinance anyway. If you plan t

Question 20

How does making biweekly or extra principal payments actually save mortgage interest?

Accepted Answer

Paying biweekly means you make half your monthly payment every two weeks, which adds up to 26 half-payments, or 13 full payments, per year instead of 12. That one extra payment goes straight to principal, shrinking your balance faster and reducing the interest charged on it over time. On a typical 30-year loan, this can shave several years off the term and save tens of thousands in interest. You can achieve the same effect by simply adding a bit extra to your regular monthly principal. Confirm y

Question 21

What first-time homebuyer down payment assistance programs exist, and how do they work?

Accepted Answer

Down payment assistance (DPA) programs are offered mainly by state housing finance agencies, cities, and some nonprofits, and they come in a few forms: grants that never need repayment, forgivable loans that disappear after you live in the home a set number of years, deferred loans repaid only when you sell or refinance, and low-interest second mortgages. Eligibility usually depends on income limits, purchase-price caps, and completing a homebuyer education course, and many require you to be a f

Question 22

Why is my mortgage payment mostly interest in the early years, and how does amortization work?

Accepted Answer

A fixed mortgage uses an amortization schedule that keeps your total monthly payment constant while shifting the split between interest and principal over time. Early on, your balance is large, so most of each payment covers interest, with only a small slice reducing principal. As the balance shrinks, less interest accrues and more of each payment attacks principal, accelerating equity growth in the later years. This is why extra principal payments early in the loan are so powerful: they cut the

Question 23

Do student loans in deferment or income-driven repayment count against my mortgage DTI?

Accepted Answer

It depends on the loan program. Fannie Mae and Freddie Mac generally use your actual documented payment, including a $0 income-driven repayment amount if shown on your statement, which helps many recent graduates qualify. FHA historically counted a percentage of the balance even for deferred or $0-payment loans, though its rules have shifted toward using the actual payment if it is above zero. VA loans often ignore payments deferred at least 12 months. Because policies differ, ask each lender ex

Question 24

What is title insurance versus a title search, and do I need both when getting a mortgage?

Accepted Answer

A title search examines public records to confirm the seller legally owns the property and to uncover liens, unpaid taxes, or ownership disputes before closing. Title insurance then protects against problems the search might miss, such as forged deeds, unknown heirs, or clerical errors, that could threaten your ownership later. There are two policies: a lender's policy, which the lender requires and protects only its loan interest, and an owner's policy, which protects your equity and is optiona

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