Frequently Asked Questions
What is PMI and when is it required?
Private Mortgage Insurance (PMI) protects the lender if you default. It's typically required when your down payment is less than 20% of the home price. PMI costs 0.3% to 1.5% of the loan amount annually and can be removed once you reach 20% equity.
How much should I put down on a house?
While 20% is ideal to avoid PMI, many buyers put down 3-10%. FHA loans require as little as 3.5%. Consider your savings, monthly budget, and other financial goals when deciding. A larger down payment reduces your monthly payment and total interest paid.
What credit score do I need for a mortgage?
Conventional loans typically require 620+. FHA loans accept scores as low as 580 with 3.5% down (500-579 requires 10% down). VA and USDA loans often have flexible requirements. Higher scores (740+) qualify for the best interest rates.
Should I choose a 15-year or 30-year mortgage?
15-year mortgages have higher monthly payments but significantly lower total interest costs and build equity faster. 30-year mortgages offer lower payments but cost more over time. Choose based on your monthly budget and long-term financial goals.
What is escrow and how does it work?
Escrow is an account managed by your lender that holds funds for property taxes and insurance. Each month, you pay 1/12 of these annual costs along with your mortgage payment. The lender pays tax and insurance bills when due from this account.
How are property taxes calculated?
Property taxes are based on your home's assessed value and local tax rates (millage rates). They vary widely by location. Contact the local tax assessor's office or your real estate agent for specific rates in areas you're considering.
Can I pay off my mortgage early?
Yes, but check for prepayment penalties in your loan agreement. Most modern mortgages allow early payoff without penalties. Making extra principal payments can significantly reduce total interest and loan term.
What is the 28/36 rule in mortgage lending?
The 28/36 rule suggests spending no more than 28% of gross monthly income on housing costs (PITI) and no more than 36% on total debt (including credit cards, car loans, etc.). Lenders use this as a guideline for loan approval.
Are property taxes and insurance included in my mortgage payment?
They can be. Most lenders require escrow for taxes and insurance, rolling them into your monthly payment. Some lenders allow you to pay these separately if you have sufficient equity (typically 20%+) or specific loan types.
What closing costs should I expect?
Closing costs typically range from 2% to 5% of the loan amount and include loan origination fees, appraisal fees, title insurance, attorney fees, inspection fees, and prepaid items (first year's insurance, prorated taxes).
How do I get the best mortgage rate?
Improve your credit score (740+ for best rates), save a larger down payment (20%+), compare offers from multiple lenders, consider paying discount points, choose a shorter loan term, and reduce your debt-to-income ratio before applying.
What is a jumbo mortgage?
A jumbo mortgage exceeds conforming loan limits set by Fannie Mae and Freddie Mac (typically $726,200 in most areas as of 2026, higher in expensive markets). Jumbo loans have stricter requirements but competitive rates for qualified buyers.