Question 1

What credit score is needed for a mortgage in 2026?

Accepted Answer

As of November 2025, Fannie Mae removed the hard 620 credit score minimum, shifting to holistic underwriting. While many lenders still prefer 620+, borrowers with lower scores may qualify if they have strong compensating factors like large down payments, low debt-to-income ratios, or significant cash reserves. FHA loans accept scores as low as 580 with 3.5% down, or 500 with 10% down.

Question 2

How do mortgage points work?

Accepted Answer

Mortgage points, or discount points, are upfront fees paid to lower your interest rate. One point equals 1% of your loan amount and typically reduces your rate by 0.25%. For example, on a $400,000 loan, one point costs $4,000. Points make sense if you plan to keep the loan long enough to recoup the upfront cost through lower monthly payments, typically 5-7 years.

Question 3

Can I refinance with bad credit?

Accepted Answer

Yes, refinancing with bad credit is possible but more challenging. FHA streamline refinances require no credit check for existing FHA loans. Conventional lenders typically want 620+ scores, but some portfolio lenders accept lower scores with higher rates. Focus on improving your credit score, building equity, and demonstrating stable income. Government programs like HARP successors may offer more flexibility for underwater borrowers.

Question 4

What is the difference between pre-qualification and pre-approval?

Accepted Answer

Pre-qualification is an informal estimate based on self-reported financial information with no documentation required. Pre-approval is a formal commitment where lenders verify your income, assets, credit, and employment. Pre-approval carries more weight with sellers because it confirms you can secure financing. In competitive markets, pre-approval letters are often required to submit serious offers. Pre-approval typically takes 1-3 business days.

Question 5

How much should I put down on a house in 2026?

Accepted Answer

The ideal down payment depends on your financial situation. While 20% down avoids PMI and reduces monthly payments, it is not mandatory. FHA loans require just 3.5% down, and conventional loans accept 3-5% for qualified buyers. Consider your cash reserves, monthly budget, and opportunity cost. In high-appreciation markets, a smaller down payment may allow you to buy sooner and build equity faster.

Question 6

What is PMI and how can I avoid it?

Accepted Answer

Private Mortgage Insurance (PMI) protects lenders when you put down less than 20%. It typically costs 0.5-1.5% of the loan amount annually, added to your monthly payment. You can avoid PMI by putting 20%+ down, using a piggyback loan (80-10-10), choosing lender-paid PMI with a higher rate, or selecting a VA loan (if eligible). Once you reach 20% equity, you can request PMI removal.

Question 7

How long does it take to close on a house?

Accepted Answer

The average mortgage closing takes 30-45 days from contract acceptance to keys in hand. Cash purchases can close in 7-14 days. Timeline factors include loan type (FHA/VA take longer), appraisal scheduling, title work, and underwriting complexity. Delays often occur with income verification, appraisal issues, or last-minute document requests. Pre-approval and responsive communication with your lender help ensure on-time closing.

Question 8

What is debt-to-income ratio and why does it matter?

Accepted Answer

Debt-to-income (DTI) ratio compares your monthly debt payments to gross monthly income. Front-end DTI includes only housing costs (PITI), while back-end DTI includes all debts. Most lenders require back-end DTI below 43-50%. For example, with $6,000 monthly income, your total debts should stay under $2,580 (43%). Lower DTI improves approval odds and interest rates. Pay down debts or increase income to improve your ratio.

Question 9

Should I get a 15-year or 30-year mortgage?

Accepted Answer

30-year mortgages offer lower monthly payments and more budget flexibility, ideal for first-time buyers or those prioritizing cash flow. 15-year mortgages have higher payments but significantly lower total interest costs and faster equity building, typically with 0.5-0.75% lower rates. Choose 15-year if you can comfortably afford higher payments and want to own your home sooner. Many borrowers start with 30-year terms and make extra principal payments.

Question 10

Can I buy a house with student loan debt?

Accepted Answer

Yes, student loans do not disqualify you from homeownership, but they impact your debt-to-income ratio. Lenders typically count 0.5-1% of your loan balance as monthly payment (even if deferred). Income-driven repayment plans can help by lowering your counted payment. Focus on maintaining good credit, saving for a down payment, and keeping total DTI below 43%. FHA and conventional loans both accommodate student debt with proper planning.

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