Mortgages and Home Loans

That depends. Every financial institution offers slightly different mortgage options and fees. Some banks may offer discounts and incentives for those who currently bank with them, while other lenders—particularly online ones—may be able to offer lower fees due to reduced overhead costs. Because of these differences, you should compare quotes from both before moving forward.

Lenders may have a suggested minimum credit score, debt-to-income ratio, and a required down payment, depending on the loan program. You may also need various documents when applying, such as recent pay stubs, tax returns, W-2s, bank statements, and verification of employment. You can typically increase your chances of qualifying by offering a larger down payment or improving your credit score.

You’ll have to fill out the lender’s preapproval form, usually found on its website. You typically need to provide a little information—your name, income, details on the house you’d like to buy —and submit to a hard credit check. The lender will then review your information, and you’ll get a preapproval letter offering a specific loan amount. The preapproval letter is typically good for 90 days.

The best loan depends on your credit score and how much you have saved for a down payment. Many first-time homebuyers use Federal Housing Association (FHA) loans because they require a 500 credit score (with a 10% down payment) or a 580 credit score (with 3.5% down). Conventional mortgages only require a minimum of 3% down, but come with much higher credit score requirements.

It depends on what type of mortgage loan you’re using. If you’re getting an FHA loan, a down payment of at least 10% is ideal, as it ensures you can cancel mortgage insurance after 11 years. If you’re getting a conventional loan, shoot for 20%. This will let you avoid private mortgage insurance altogether.

FHA and conventional loans are most common. Federal Housing Administration (FHA) loans are insured, reducing the risk for lenders that loan funds to less creditworthy borrowers. Conventional loans are issued by private lenders and don’t have this insurance. There are also jumbo loans (for higher-priced properties), VA loans (for veterans and military members), and USDA loans (for rural buyers).

The most common mortgage terms are 30 or 15 years. This means the loan balance is repaid over either 15 or 30 years. Adjustable-rate mortgages (ARM) come in 3/1, 5/1, 7/1, and 10/1 terms. This means your interest rate is fixed for three, five, seven, or 10 years, and after that, the rate resets annually based on current mortgage interest rates.

Your mortgage payment may go down over time, but it depends on several factors. With an adjustable-rate loan, your interest rate can change and, thus, your mortgage payment, too. Refinancing your loan may also reduce your mortgage payment. If neither of these scenarios applies, your payment will remain roughly the same (excluding changes to property taxes, PMI, home insurance, or servicer fees).