Mortgage FAQs
Get answers to the most common questions about home loans, down payments, closing costs, and the mortgage process.
Frequently Asked Questions
What are my options if I have no down payment, or only a small down payment?
There are several options available for borrowers with little or no down payment. FHA loans require as little as 3.5% down, making them a popular choice for first-time buyers. Piggy-back loans allow you to take a second loan to cover part of the down payment. Some programs offer 100% financing, meaning no down payment is required at all. Additionally, VA loans (for eligible veterans and active-duty service members) and USDA loans (for eligible rural properties) both offer zero-down-payment financing. Our team can help you explore which option fits your situation best.
What is private mortgage insurance (PMI)?
Private mortgage insurance (PMI) is a type of insurance that protects the lender if you default on your mortgage. It is typically required when your down payment is less than 20% of the home's purchase price, meaning your loan-to-value (LTV) ratio exceeds 80%. PMI generally adds approximately 0.5% of the loan amount to your annual mortgage costs. Once you build enough equity in your home — usually reaching 20% — you can request to have PMI removed, which lowers your monthly payment.
What kinds of government loans are available?
Several government-backed loan programs are available to help make homeownership more accessible. FHA loans, insured by the Federal Housing Administration, offer low down payments and flexible credit requirements. VA loans, guaranteed by the Department of Veterans Affairs, provide zero-down-payment options for eligible veterans, active-duty military, and surviving spouses. HUD programs support affordable housing initiatives and community development. The FHA 203(k) rehabilitation loan allows buyers to finance both the purchase and renovation of a property in a single mortgage. Each program has unique eligibility requirements, and we can help determine which one is right for you.
What is the difference between a fixed rate and an adjustable rate mortgage?
A fixed-rate mortgage (FRM) maintains the same interest rate for the entire life of the loan, providing predictable monthly payments that never change. This is ideal for borrowers who plan to stay in their home long-term and want stability. An adjustable-rate mortgage (ARM) starts with an initial fixed-rate period (commonly 5, 7, or 10 years) and then adjusts periodically based on market conditions and an index rate. ARMs typically offer lower initial rates than fixed-rate mortgages, which can be advantageous if you plan to sell or refinance before the adjustment period begins.
What is included in closing costs?
Closing costs encompass a variety of fees and expenses required to finalize your mortgage. These typically include: the loan application fee, appraisal fee to determine the property's market value, credit report fee, property survey, title search and title insurance to protect against ownership disputes, attorney fees, recording fees charged by the county, points (both origination points paid to the lender and discount points to buy down your interest rate), and escrow deposits for property taxes and homeowners insurance. Closing costs generally range from 2% to 5% of the loan amount. We provide a detailed estimate early in the process so there are no surprises.
How can I speed up the loan approval process?
There are several steps you can take to expedite your loan approval. First, get pre-qualified before you start house hunting — this gives you a clear picture of your budget and shows sellers you are a serious buyer. Second, gather and prepare all necessary documents in advance, including pay stubs, tax returns, bank statements, and identification. Third, respond promptly to any requests from your loan officer for additional information or documentation. Staying organized and communicative throughout the process helps prevent delays and keeps your closing on track.
What is the difference between a mortgage broker, a lender, and a loan officer?
A mortgage lender is a financial institution (such as a bank, credit union, or mortgage company) that provides the funds for your home loan. A mortgage broker is an independent professional who acts as an intermediary between you and multiple lenders, shopping around to find the best loan terms on your behalf. A loan officer is an individual who works for a lender or broker and guides you through the application and approval process. At Home Financial Group, our experienced loan officers work directly with you to find the best mortgage solution for your needs.
What documents are needed to close on a mortgage?
To close on a mortgage, you will generally need to provide: proof of income (recent pay stubs, W-2s, or tax returns for self-employed borrowers), personal financial statements, bank statements from the past two to three months, employment verification, a valid government-issued photo ID, and a copy of the signed purchase contract. Depending on your situation, additional documentation such as divorce decrees, gift letters, or explanations for credit inquiries may also be required. Your loan officer will provide a complete checklist specific to your loan type.
Is it more expensive to rent or to own a home?
The answer depends on several factors, including your local housing market, how long you plan to stay, and your financial situation. Renting offers flexibility and fewer maintenance responsibilities, but rent payments do not build equity. Homeownership typically involves higher upfront costs (down payment, closing costs) and ongoing expenses (maintenance, taxes, insurance), but you build equity over time and may benefit from tax deductions on mortgage interest. In many markets, monthly mortgage payments can be comparable to or even lower than rent for a similar property, especially with today's loan programs that require low down payments.
Why should I check my credit before buying a home?
Checking your credit before applying for a mortgage is essential because your credit score significantly influences the interest rate and loan terms you will be offered. Reviewing your credit report early allows you to identify and correct any errors, pay down outstanding debts, and take steps to improve your score before a lender pulls your credit. Even a small improvement in your credit score can translate to a lower interest rate, saving you thousands of dollars over the life of your loan. We recommend checking your credit at least three to six months before you plan to buy.
What is the difference between conforming and non-conforming loans?
Conforming loans meet the standards set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that purchase mortgages from lenders. These standards include maximum loan amounts (which vary by county), credit score minimums, and debt-to-income ratio limits. Because conforming loans can be sold to Fannie Mae or Freddie Mac, they typically offer lower interest rates. Non-conforming loans do not meet these standards — the most common type being jumbo loans, which exceed the conforming loan limit. Non-conforming loans may have higher interest rates and stricter qualification requirements but are essential for borrowers purchasing higher-priced properties.
Where do the names Fannie Mae and Freddie Mac come from?
Fannie Mae is the colloquial name for the Federal National Mortgage Association (FNMA), which was established in 1938 as part of the New Deal to expand the secondary mortgage market and make homeownership more accessible. Freddie Mac is the nickname for the Federal Home Loan Mortgage Corporation (FHLMC), created in 1968 (chartered in 1970) to provide competition for Fannie Mae and further support the mortgage market. Both organizations buy mortgages from lenders, package them into mortgage-backed securities, and sell them to investors, which helps keep mortgage rates affordable and credit flowing.
What are points?
In mortgage lending, "points" refer to fees paid directly to the lender at closing. There are two types: origination points and discount points. Origination points are fees the lender charges to process and underwrite the loan — typically around 1% of the loan amount. Discount points are optional prepaid interest that you can purchase to reduce ("buy down") your mortgage interest rate. Each discount point generally costs 1% of the loan amount and lowers your rate by approximately 0.25%. Paying discount points can be a smart strategy if you plan to keep the loan long-term, as the interest savings over time can exceed the upfront cost.
Still Have Questions?
Our experienced mortgage professionals are ready to help. Contact Home Financial Group today and let us guide you through the home loan process.