Frequently Asked Questions About Mortgages

As of November 2025, Fannie Mae removed the hard 620 credit score minimum, shifting to holistic underwriting. While many lenders still prefer 620+, borrowers with lower scores may qualify if they have strong compensating factors like large down payments, low debt-to-income ratios, or significant cash reserves.

FHA loans accept scores as low as 580 with 3.5% down, or 500 with 10% down. This applies to borrowers in California, Texas, Florida, and all 18 states we serve.

Read our detailed analysis: Fannie Mae Removes 620 Minimum →

Pre-qualification is an informal estimate based on self-reported financial information with no documentation required. Pre-approval is a formal commitment where lenders verify your income, assets, credit, and employment.

According to the Consumer Financial Protection Bureau (CFPB), pre-approval carries more weight with sellers because it confirms you can secure financing. In competitive markets like California and Arizona, pre-approval letters are often required to submit serious offers.

Learn more: How It Works → or start your pre-approval today.

The ideal down payment depends on your financial situation. While 20% down avoids PMI and reduces monthly payments, it's not mandatory.

• FHA loans: 3.5% down (580+ credit score)
• VA loans: $0 down for eligible veterans
• USDA loans: $0 down in eligible rural areas
• Conventional: 3-5% for qualified first-time buyers
• DPA programs: grants and second mortgages to cover your down payment

First-time buyers averaged 8% down in 2024. NAR 2024 Home Buyer Research

Mortgage points (or discount points) are upfront fees paid to lower your interest rate. One point = 1% of your loan amount and typically reduces your rate by 0.25%.

For example, on a $400,000 loan, one point costs $4,000 and would lower your rate from 6.75% to 6.50%. That saves about $66/month, so you'd break even in roughly 5 years.

Points make sense if you plan to keep the loan long enough to recoup the cost. Our blog breaks this down in detail: The APR Breakdown →

Check current rates to see if points are worth it: Today's Rates →

Private Mortgage Insurance (PMI) protects lenders when you put down less than 20%. It typically costs 0.5-1.5% of the loan amount annually — that's $167-$500/month on a $400,000 loan.

Ways to avoid or eliminate PMI:

• Put 20%+ down
• Use a piggyback loan (80-10-10)
• Choose lender-paid PMI (LPMI) with a slightly higher rate
• Use a VA loan — no PMI regardless of down payment
• Once you hit 20% equity, request PMI removal from your servicer

30-year mortgage: Lower monthly payments, more budget flexibility. Ideal for first-time buyers who want breathing room. You'll pay more interest over the life of the loan.

15-year mortgage: Higher monthly payments but significantly lower total interest costs and faster equity building. Rates are typically 0.5-0.75% lower than 30-year terms.

On a $400,000 loan at current rates:

• 30-year at 6.5%: ~$2,528/month → $510,177 total interest
• 15-year at 5.75%: ~$3,322/month → $197,973 total interest

Many borrowers choose the 30-year and make extra principal payments when they can. Use our payoff calculator to see how extra payments shorten your term. Read more: The Refinance Trap →

Debt-to-income (DTI) ratio compares your monthly debt payments to gross monthly income. There are two types:

• Front-end DTI: Housing costs only (PITI). Most lenders want this below 28-31%.
• Back-end DTI: All debts (housing + car loans + student loans + credit cards). Most lenders require below 43-50%.

Lower DTI improves your approval odds and gets you better interest rates. FHA loans allow up to 57% back-end DTI with compensating factors, while conventional loans typically cap at 50%.

Yes, refinancing with bad credit is possible but more challenging. Your best options:

• FHA Streamline: No credit check required for existing FHA loans
• VA IRRRL: Simplified refinancing for VA loan holders with minimal documentation
• Conventional: Most lenders want 620+ scores, but some portfolio lenders accept lower with higher rates
• Cash-out refi: May require higher scores (640-660+) due to increased risk

Check current refinance rates: Today's Refi Rates →

Yes! Student loans do not disqualify you from homeownership, but they impact your debt-to-income ratio.

How lenders count student loans:

• Conventional: 0.5% of outstanding balance OR the actual monthly payment (whichever is documented)
• FHA: 0.5% of balance if in deferment; actual payment if in repayment
• VA: Actual monthly payment (income-driven plans accepted)

Income-driven repayment plans can help by lowering your counted payment. Focus on maintaining good credit and keeping total DTI below 43%. Our guide covers this in depth: First-Time Buyer Programs →

The average mortgage closing takes 30-45 days from contract acceptance to keys. Here's the typical timeline:

• Days 1-3: Open escrow, deposit earnest money
• Days 3-10: Home inspection, appraisal ordered
• Days 10-21: Underwriting, title work, contingency removals
• Days 21-30: Final approval, signing, funding, recording

Factors that affect timing: Loan type (FHA/VA can take 5-10 extra days), appraisal scheduling, title complications, and how quickly you provide documents. ICE Mortgage Technology Report

Getting pre-approved and being responsive with documentation are the two best ways to stay on schedule. Watch our full walkthrough: Home Closing Day Deep Dive →