Frequently Asked Questions

  • How do you get preapproved for a home loan?

    A mortgage preapproval shows sellers you are a serious buyer with the means to make a purchase. To get one, you’ll complete a mortgage application with a bank or broker. You will be asked to provide details about your finances and income, including pay stubs, tax documents, and bank statements. Note that this process differs from a mortgage prequalification, which is less stringent and requires less documentation.

  • What is an FHA loan?

    An FHA home loan is issued by a private lender and insured by the Federal Housing Administration (FHA). Because they are insured, these loans provide assurance to lenders that the loan will be repaid. They are intended for moderate- or low-income borrowers, and have several appealing features including small down payments, low credit score minimums, and assumability (which means a buyer can take over the loan, subject to lender approval).

  • What is the home loan interest rate?

    The home loan interest rate is the amount of interest charged by banks and other lenders for money borrowed to purchase a home. Rates change daily according to market forces, and the rate you may be charged for a loan when you buy a home will depend on your credit score and other factors. The Balance tracks current mortgage rates for several popular loan types, updated daily, which you can follow here.

  • What is a USDA home loan?

    This is a mortgage offered by the USDA or one issued by a private lender and insured by the USDA. Borrowers can use them to purchase, renovate, or refinance property in certain rural communities across the U.S. Direct USDA loans can be easier to qualify for than many other loans. Both types (direct and insured) have income eligibility requirements, and borrowers do not need to make a down payment.

  • What is a good credit score for a home loan?

    Your credit score is one of the most important factors in getting a home loan—and how much it will cost you. For conventional loans, required minimum credit scores range from 620 to 640, depending on the loan and the lender. Some loans backed by the U.S. government have lower minimum credit score requirements. For example, FHA-insured loans accept credit scores as low as 500, and VA-insured loans have no minimum requirements. 

  • How does the VA home loan work?

    A VA loan is a mortgage available to veterans, military members, and their spouses. These loans are guaranteed by the Department of Veterans Affairs and this extra protection for the lender encourages better terms and interest rates. However, the VA will only guarantee a portion of your loan (which the VA calls your “entitlement”), so individual lenders may institute their own maximum loan amounts to offset any lending risk.

  • How much of a home loan can I get?

    Ultimately your maximum loan amount will be determined by your financial situation (income, credit score, debt-to-income ratio, savings) and the property you want to buy. However, most lenders will follow lending caps set by the Federal Housing Finance Agency. Those caps limit the size of the “conforming” loans that lenders sell to Fannie Mae and Freddie Mac, the government-sponsored enterprises that purchase, aggregate, and resell mortgages. Maximum loan amounts vary by county and are recalculated annually.

Key Terms

Tips: making an earnest money deposit. Never give an earnest money deposit directly to the seller, obtain a receipt, authorize a release of your earnest money (or a pass-through) until your transaction closes, make the deposit payable to a reputable third party such as a well know real estate brokerage, legal firm, escrow company, or title company. Verify that third party will deposit the funds into a separately maintained trust account.
What an Earnest Money Deposit Is (and How to Protect It)
Couple embracing outside new house
First-Time Homebuyer Programs
Image shows a couple in front of a modern home shaking hands with a realtor. Text reads: "Essentials of owner financing: also known as 'seller financing'; instead of taking out a mortgage with a commercial lender, they buyer is borrowing the money from the seller; buyers can combine a loan from the seller with one from the bank; buyer gives the seller a promissory note agreeing to these terms, which is generally entered in the public records, thus protecting both parties"
How to Buy a Home With Seller Financing
Woman paying utility bills on tablet
Having trouble Getting a Mortgage? Manual Underwriting Could Help.
A couple is discussing a loan with a financial advisor.
What Is an Interest-Only Loan?
Businesswoman signing a contract in a cafe
What Is a NINJA Loan?
tenants receiving their property keys
A HUD Loan Could Help You Buy a Home—Here’s What It Entails
A soldier celebrates closing on a new home
How Much Are VA Loan Closing Costs?
House keys on dollar
The Hidden Cost of Home Ownership Most Buyers Forget
Realtor with family in new home
How Much Are Closing Costs for the Buyer?
Couple Going Over Finances
What Is Your Debt-to-Income Ratio?
A couple looks over financial paperwork
What Is a Wraparound Mortgage?
Young couple talking in doorway of their tiny house.
What Is a Chattel Mortgage?
graphic showing two people on top of stack of books with a ruler and pencil. the words "financial rules of thumb" are in the middle
What Is the 28/36 Rule of Thumb for Mortgages?
Image shows a home and two people in front of it, where a woman is signing a document called "land contract" held on a clipboard by a man in a suit. Text reads: "What does a land contract cover? Sales price, amount of down payment, interest rate, amount of monthly (or periodic) payments, duties of each of the parties, plan of recourse for the seller in the event the buyer stops making the installment payments"
Why Land Contracts Make an Attractive Financing Alternative for Buyers
A man and a woman step back from their work drywalling a room and smile.
What Is an FHA 203(k) Loan?
Illustration of what to know about payoff letters, as explained in article.
What Is a Payoff Letter?
Smiling couple standing in the vacant kitchen of their first home
The Best Home Buying Checklist for First-Time Home Buyers
Image shows two solemn looking men looking at a home that's sold. Text reads: "Who benefits from interest-only mortgages? Buyers whose income fluctuates because of earning commissions pay interest-only payments during slim months and extra toward the principal when bonuses or commissions are received. Gives first-time home-owners the option to pay a lower payment during the early years of the loan."
How to Lower Your Payment With an Interest-Only Mortgage
A couple looking at mortgage papers
What to Do When Your Mortgage Is Sold
what to know about lease options. In each case, the buyer (property renter) pays option money to the seller (property owner) for the exclusive rights to purchase a property, all within a specified time frame. option to purchase, lease option, and lease purchase agreement,
What You Should Know About Lease Options and Purchase Sales
A smiling Black couple review paperwork with a mortgage broker.
Can a Mortgage Broker Help You Buy Your Next Home?
A mobile home with car port and grassy garden
How To Get a Loan for a Manufactured Home
Happy young couple receives keys to their new home
What Is a Vendor Take Back Mortgage?
Couple with two children carrying boxes through front door of new home
What Is a Mortgage?
Family sitting on floor of living room of new home during move in day
Can’t Afford a House? These First-time Homebuyer Grants Can Help
Couple signing paperwork in office with lawyer
Buying a Home? Get Help Covering Closing Costs
Mortgage broker talking to prospective homebuyers
How to Find a Mortgage Broker or Bank Loan Officer for Your Home
Image shows an interracial, queer couple looking elated as a mortgage lender tells them that they're approved for a mortgage. On the computer screen between them it reads: "Mortgage lender: approved!"
A Step-by-Step March Through the Mortgage Approval Process
Two women having garage sale
7 Ways To Find That Down Payment for a Home
A couple looks over their HUD paperwork in their kitchen
How to Buy a HUD Home
Woman placing orchid on fireplace in empty room
Are You Paying More Than the Average Monthly Mortgage Payment?
Pros and Cons of VA Loans include Pros: Lower costs upfront May offer better rates and lower terms Assumable by new homeowners Consumer-friendly loan terms Cons: Strict service requirements Not offered by all lenders Risky if home values drop
Everything You Need to Know About VA Loans
two kids running into an empty house. two adults are behind them, coming through the door.
11 Steps to Buying a House
A saleswoman or estate agent shows a couple around a home with new kitchen
What Is Effective Income?
Balloon Payment
What Is a Balloon Payment?
Image shows a man looking at a home through a magnifying glass. Text reads: "What to know about home appraisal costs: The best time to bring up the cost of an appraisal is when you are ready to choose a mortgage broker. The costs of an appraisal varies depending on location. Appraisers receive a copy of the purchase offer and try to find comparable sales that will meet the appraised value"
Why Home Appraisals Cost More Than You Think
Realtor showing house for sale to a young couple.
What Is a Purchase Money Loan?
A woman holds up a model of a sleek home and looks closely at it.
Home Loans for Teachers
Couple surrounded by boxes while moving into new home
What To Know About First-Time Homebuyer Classes
Construction crew installing solar panels on a house
How To Get a Green Loan
Couple talking with financial advisor
Get the Pros and Cons of a 40-Year Mortgage Loan.
Couple signing paperwork to buy a house
Why Buying a Home Subject-To Can Be Risky
Husband and wife holding baby and looking at laptop
What Is an Upfront Mortgage Insurance Premium (UFMIP)?
A couple takes a selfie in their new home, surrounded by moving boxes
Can You Buy a Foreclosure With an FHA Loan?
Smiling woman and man sign a loan estimate with an agent
What Is a Loan Estimate?
feet covered in snow, representing cold feet
Why Home Shoppers Get Cold Feet and How to Deal With Buyer's Remorse
Homeowner getting a foreclosure sign on home
What Happens After a Notice of Default is Filed in California?
Illustration about "why do low appraisals happen?"
How to Deal With a Low Appraisal
A child holds balloons while running in front of a house
What Is a Balloon Mortgage?
Mature Couple Discussing Documents With Professional
Pros and Cons of a Private Mortgage
Image shows two women embracing and looking at a piece of paper that reads "assumable mortgage". Text reads: "Quick facts: transferring mortgages: assumable mortgages are transferable, but not widely available; unofficial transfers are a bad idea; exceptions might exist in special cases, like if the homeowner has died or you're facing foreclosure; if all else fails, refinancing might be your best bet."
Can You Transfer a Mortgage to Someone Else?
a person handing keys to another person
The Ramifications of Not Understanding a Due-on-Sale Clause
This illustration shows common homebuying fees, including homeowners insurance, title insurance, survey fees, inspection fees, escrow fees, and appraisal fees.
Buying a House? Be Prepared for These Fees
Young man and woman signing and handing documents to a woman at a glass desk.
How Your Student Loan Balance Impacts Your Ability to Get an FHA Loan
a businessman and a young couple looking at a laptop
What Is Desktop Underwriting?
Loan with red "approved" stamp and signature on it
What Is a No-Income Loan?
what is a mortgage
How Your Credit Score Determines Your Mortgage Rate
A man working on a construction site wields a drill driver as the sun rises behind him.
How to Get an FHA Construction Loan
Man looking over papers at desk in front of woman
Why Sellers Demand Proof of Funds from a Buyer