Mortgage questions, answered plainly.
The questions borrowers ask most — about buying, refinancing, choosing a loan, and investor financing — in one place.
Buying a home
What is the difference between pre-qualification and pre-approval?
A pre-qualification is a quick estimate based on information you provide, while a pre-approval means a lender has reviewed your credit, income and assets. Sellers and agents treat a pre-approval letter as a much stronger offer.
How much do I need for a down payment?
It depends on the loan program: conventional loans can start at 3% down, FHA loans at 3.5% down for qualifying credit, and VA and USDA loans can offer 0% down for eligible buyers. Closing costs are separate, so budget for those as well.
What credit score do I need to buy a home?
Minimums vary by program, but FHA loans generally accept lower scores than conventional loans, and higher scores usually earn better rates. A broker can match your score to the programs and lenders most likely to approve it.
Why use a mortgage broker instead of a bank?
A mortgage broker compares loan options from multiple wholesale lenders, while a bank can only offer its own products. That comparison often leads to a better rate, lower costs, or an approval a single bank would not give.
How long does it take to close on a home?
Most purchase loans close in about 30 days from application, depending on the appraisal, documentation and the contract timeline. Getting pre-approved before you shop shortens the process.
What is a jumbo loan?
A jumbo loan is a mortgage above the conforming loan limit set each year for your county. Jumbo loans usually require stronger credit, more reserves and fuller documentation.
Refinancing
When does it make sense to refinance?
Refinancing usually makes sense when it lowers your rate or payment enough to recover the closing costs within the time you plan to keep the home. Other common reasons are shortening the term, removing mortgage insurance, or taking cash out.
What is a cash-out refinance?
A cash-out refinance replaces your current mortgage with a larger one and pays you the difference in cash. Homeowners often use it for renovations, debt consolidation or investment purchases.
What is the break-even point on a refinance?
The break-even point is how many months of savings it takes to cover the cost of the refinance. Divide the total closing costs by the monthly savings to find it.
What is a streamline refinance?
A streamline refinance is a simplified refinance for existing FHA or VA loans (the VA version is called an IRRRL), usually with less paperwork and often no new appraisal. It is designed to lower the rate or payment on a government loan.
Does refinancing hurt my credit?
A refinance causes a small, temporary dip from the credit check and new account, which typically recovers within a few months of on-time payments. Rate shopping within a short window is generally counted as a single inquiry.
Choosing a loan
Should I choose a fixed-rate or adjustable-rate mortgage?
A fixed-rate mortgage keeps the same rate and payment for the life of the loan, while an ARM starts with a fixed period and then adjusts. ARMs can make sense if you expect to sell or refinance before the fixed period ends.
What is the difference between a 15-year and 30-year mortgage?
A 15-year mortgage has higher monthly payments but usually a lower rate and far less total interest. A 30-year mortgage keeps payments lower and more flexible.
What is a conforming loan?
A conforming loan is a conventional mortgage that falls within the loan limits and guidelines set for Fannie Mae and Freddie Mac. Loans above those limits are jumbo loans.
Who qualifies for a VA loan?
VA loans are available to eligible active-duty service members, veterans, and some surviving spouses who have a Certificate of Eligibility. They often require no down payment and no monthly mortgage insurance.
What is a USDA loan?
A USDA loan is a government-backed mortgage for homes in eligible rural and suburban areas, with income limits for the household. Eligible buyers can often purchase with no down payment.
Investor financing
What is a hard money loan?
A hard money loan is a short-term loan from a private lender that is based mainly on the value of the property rather than the borrower's income. Investors use them for fix-and-flip and other projects that need fast, flexible financing.
What is a DSCR loan?
A DSCR (debt service coverage ratio) loan qualifies an investment property based on its rental income compared with the mortgage payment, instead of your personal income or tax returns. It is commonly used to buy or refinance rental properties.
How do fix-and-flip loans work?
A fix-and-flip loan funds the purchase of a property and, often, the cost of renovations, which are released in draws as the work is completed. The loan is usually repaid when the property is sold or refinanced.
What is a ground-up construction loan?
A ground-up construction loan finances building a new property from the land up, with funds released in stages as construction milestones are reached. It is typically repaid by selling the finished property or refinancing into a long-term loan.
Do I need experience to get an investor loan?
Experience can improve terms, but many investor programs work with first-time investors. Lenders focus mostly on the deal, the property value and the exit plan.
How fast can a private or hard money loan close?
Private and hard money loans often close much faster than traditional mortgages, sometimes within one to two weeks, because underwriting centers on the property. Timing depends on the appraisal and title work.
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