Home Loans: common questions
Each answer links to the guide it comes from, with sources.
Do I need 20 percent down?
No. FHA loans allow as little as 3.5 percent down with a qualifying credit score, many VA loans need no down payment, and some conventional programs allow 3 percent. With a conventional loan and less than 20 percent down, you'll usually pay private mortgage insurance.
Is a Loan Estimate an approval?
No. The CFPB notes that when you receive a Loan Estimate, the lender has not yet approved or denied your application. It's a standard form that shows the loan's estimated rate, monthly payment and closing costs.
Does FHA lend the money?
No. Private lenders make FHA loans. The FHA, part of HUD, insures them, which lets lenders offer terms they might not otherwise.
Can I use an FHA loan for a rental property?
Not as an investment. At least one borrower must move in within 60 days of closing and plan to live there for at least a year.
Who counts as a first-time homebuyer?
For FHA purposes, HUD counts someone who hasn't owned another property in the three years before the loan's case number is assigned. Other programs use their own definitions, so check each one.
How long does a rate lock last?
The CFPB says rate locks are typically available for 30, 45 or 60 days. The rate holds only if you close in that time and nothing changes in your application.
Is non-QM the same as a subprime loan?
No. Non-QM only means the loan falls outside the Qualified Mortgage rules, for example because of how income is shown or because it has a feature like an interest-only period. The lender must still check that you can repay.
Who sets the rules for bank statement and profit and loss loans?
Each lender. There's no single federal standard, so the number of months of statements, who prepares a profit and loss statement and how business expenses are counted vary from lender to lender.
Is there a limit on how much I can borrow with a VA loan?
If you have full entitlement, VA sets no loan limit, as long as you can afford the loan and the appraisal supports the price. Your lender still decides whether to make the loan.
Does VA offer reverse mortgages?
No. The CFPB warns that VA does not offer reverse mortgage loans. Be wary of ads that suggest otherwise.
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