Dan Green – Homebuyer.com

Mortgage Statistics For Research, Home Buyers, & Real Estate Agents

Dan Green — Sun, 20 Aug 2023 19:06:14 +0000

We combed through 90.3 million home buyer mortgage applications from the last six years to bring you hundreds of mortgage statistics to share with friends, colleagues, and your REALTOR®.

Our methodology is included at the bottom of this page.

You may also be interested in our companion report, Generational Home Buyer Statistics, which lists more than 100 surprising statistics about home buyers and homeowners nationwide.

Happy homebuying, everyone.

Mortgage Market Statistics From 2023

All mortgages

Mortgage applications submitted: 4,941,325
Mortgage loans funded: 3,820,370
Mortgage approval rate: 81.04%
Average mortgage loan size: $347,590

Mortgages for home buyers

Mortgage applications submitted by home buyers: 3,769,790
Mortgage loans funded for home buyers: 3,096,748
Mortgage approval rate for home buyers: 85.76%
Total purchase mortgage volume: $1,327,921,880,000

Purchase mortgage statistics

81.06% of mortgages were purchase mortgages
The average loan size for a purchase mortgage was $367,298
The average interest rate for a purchase mortgage was 6.619%
The average origination fee for a purchase mortgage was 0.788%

Refinance mortgage statistics

18.94% of mortgages were refinances, including cash-out refinances, rate-and-term refinances, and debt consolidation
The average loan size for a refinance mortgage was $263,254
The average interest rate for a refinance mortgage was 6.563%
The average origination fee for a refinance mortgage was 1.517%

Purchase and Refinance Market Share (Since 2018)

Data: Federal Financial Institutions Examination Council (FFIEC) / Home Mortgage Disclosure Act (HMDA). Accuracy of the data is based on public reporting standards and does not reflect individual lender submissions. Last updated: February 11, 2025

2023 Mortgage Statistics: Occupancy

Primary Residence Mortgage Statistics

2,910,146 mortgages were issued for primary residences
The total volume of primary residence mortgages was $1,068,527,520,000
The average mortgage rate on a primary residence home was 6.596%
The average loan size of a primary residence mortgage was $367,173

Second Home Mortgage Statistics

91,268 mortgages were issued for second homes
The total volume of second home mortgages was $53,286,885,000
The average mortgage rate on a second home was 6.906%
The average loan size of a second home mortgage was $505,132

Investment Property Mortgage Statistics

95,334 mortgages were issued for investment properties
The total volume of investment property mortgages was $34,322,940,000
The average mortgage rate on a investment property home was 7.260%
The average loan size of a investment property mortgage was $252,289

2023 Mortgage Statistics: Loan Type

Conventional Mortgage Statistics

68.54% of financing home buyers used a conventional mortgage to finance their home
The average size of a conventional mortgage was $384,644
The average mortgage rate for a primary residence conventional mortgage was 6.593%.
The average origination fee charged for a conventional mortgage was 0.685%
11.168% of home buyers using conventional mortgages selected a conventional ARM

FHA Mortgage Statistics

19.68% of financing home buyers used an FHA mortgage to finance their home
The average size of an FHA mortgage was $306,799
The average mortgage rate for a primary residence FHA mortgage was 6.451%.
The average origination fee charged for a FHA mortgage was 1.100%
0.396% of home buyers using FHA mortgages selected an FHA ARM

VA Mortgage Statistics

10.66% of financing home buyers used a VA mortgage to finance their home
The average size of a VA mortgage was $375,685
The average mortgage rate for a primary residence VA mortgage was 6.265%.
The average origination fee charged for a VA mortgage was 0.419%
0.410% of home buyers using VA mortgages selected a VA ARM

USDA Mortgage Statistics

1.11% of financing home buyers used a USDA mortgage to finance their home
The average size of a USDA mortgage was $185,045
The average mortgage rate for a primary residence USDA mortgage was 6.504%.
The average origination fee charged for a USDA mortgage was 1.278%
The USDA mortgages did not offer an adjustable-rate mortgage option in 2023.

Relative Market Share By Mortgage Loan Type (2018-2023)

2023 Mortgage Statistics: Loan Characteristics

Comparing conventional 30-year fixed-rate vs 15-year fixed-rate mortgages

Since 2000, 15-year mortgages average 0.559 percentage points below 30-year mortgages
Since 2020, the largest weekly spread between a 15-year and 30-year mortgage is 0.970 percentage points (June 16, 2022)
Since 2020, the smallest weekly spread between a 15-year and 30-year mortgage is 0.440 percentage points (November 25, 2020)

Source:

Changes in conventional 30-year fixed-rate mortgage rates

Largest weekly increase: March 14, 1980 when rates moved 14.00% to 15.40% (+1.40%)
Largest weekly decrease: May 9, 1980, when rates moved 15.90% to 14.68% (-1.22%)
Largest recent weekly increase: June 16, 2022, when rates moved 5.23% to 5.78% (+0.55%)
Largest recent weekly decrease: November 17, 2022, when rates moved 7.08% to 6.61% (-0.47%)

Source:

Mortgage Traits

87.54% of 2023 mortgages used a 30-year mortgage term
7.78% of 2023 mortgages were ARMs
The average mortgage origination fee in 2023 was 0.74% per loan
98.10% of mortgages in 2023 were for 1-unit homes including single-family homes, warrantable condos, non-warrantable condos, and townhomes

Financing Terms

0.031% of 2023 mortgages carried a prepayment penalty
0.312% of 2023 mortgages carried a balloon payment
1.595% of 2023 mortgages had an interest only feature
0.001% of 2023 mortgages had a negative amortization feature

2023 Mortgage Statistics: Downpayments

32.38% of home buyers made a down payment of more than 20 percent
14.92% of home buyers made a down payment of between 5 and 10 percent
10.66% of home buyers made a down payment of between 3 and 5 percent
23.46% of home buyers made a down payment of less than 3 percent

2023 Mortgage Statistics: County-by-County Data

Counties with the highest mortgage rates

County	Average Interest Rate
Holmes, MS	7.340%
Quay, NM	7.308%
Tallahatchie, MS	7.300%
Dickenson, VA	7.259%
Pope, IL	7.256%

Counties with the lowest mortgage rates

County	Average Interest Rate
New York, NY	5.832%
Guadalupe, TX	5.896%
Berkshire, MA	5.952%
Saratoga, NY	5.972%
Caldwell, TX	5.977%

Counties with the highest mortgage origination fees

County	Average Origination Fee
Coahoma, MS	2.513%
Mitchell, TX	2.187%
Stoddard, MO	2.132%
Lincoln, AR	2.094%
Dunklin, MO	2.093%
Swisher, TX	2.078%
Lake, TN	2.059%
White Pine, NV	2.030%
Phillips, AR	2.008%
Wayne, TN	1.950%

Counties with the lowest mortgage origination fees

County	Average Origination Fee
Berkshire, MA	-0.472%
Braxton, WV	-0.101%
Wayne, WV	0.031%
Santa Clara, CA	0.047%
Dukes, MA	0.055%
Dane, WI	0.070%
Sublette, WY	0.081%
Letcher, KY	0.093%
Boone, WV	0.106%
San Mateo, CA	0.126%

Counties with the most USDA mortgage loans

County	USDA Loans Count
East Baton Rouge, LA	151
Livingston, LA	147
Spartanburg, SC	144
Berkeley, WV	141
Lafayette, LA	141
St. Francois, MO	131
Tangipahoa, LA	117
Bexar, TX	114
St. Tammany, LA	113
Madison, AL	111

2023 Mortgage Statistics: Low-to-Moderate Income Households

The median household income is the middle amount of money families make in a specific city or area, calculated by the FFIEC.

Imagine 100 households lining up based on how much money they make every year. The family standing right in the middle of the line makes the median household income.

The FFIEC calculates median household income for different metro areas to help banks and lenders understand how much families in an area typically make and help decide who can qualify for certain loans.

Households earning 100% of the median income for the area

38.017% of conventional buyers earn no more than the median income for their area
52.451% of FHA buyers earn no more than the median income for their area
39.720% of VA buyers earn no more than the median income for their area
70.268% of USDA mortgage buyers earn no more than the median income for their area

Households earning 80% of the median income for the area

25.211% of conventional buyers earn 80% or less of their area’s median income
31.591% of FHA buyers earn 80% or less of their area’s median income
21.642% of VA buyers earn 80% or less of their area’s median income
41.172% of USDA buyers earn 80% or less of their area’s median income

Households earning 50% of the median income for the area

6.179% of conventional buyers earn 50% or less of their area’s median income
5.896% of FHA buyers earn 50% or less of their area’s median income
2.479% of VA buyers earn 50% or less of their area’s median income
6.531% of USDA buyers earn 50% or less of their area’s median income

2023 Mortgage Lender Statistics

4,665 mortgage lenders funded mortgage loans for home buyers

Top 10 purchase mortgage companies in 2023 by volume

Mortgage Lender	Total Loan Volume
United Shore Financial Services	$89,984,280,000
Rocket Mortgage	$44,750,810,000
Crosscountry Mortgage	$25,753,480,000
Fairway Independent Mortgage Corporation	$24,834,930,000
Jpmorgan Chase Bank	$23,453,680,000
Dhi Mortgage Company	$21,006,495,000
Wells Fargo Bank	$20,363,920,000
Guaranteed Rate	$18,558,320,000
Movement Mortgage	$18,401,870,000
U.S. Bank National Association	$18,148,195,000

Top 10 purchase mortgage companies in 2023

Mortgage Lender	Mortgages Funded
United Shore Financial Services	230,790
Rocket Mortgage	129,468
Fairway Independent Mortgage Corporation	72,602
Crosscountry Mortgage	69,946
Dhi Mortgage Company	62,153
Mortgage Research Center	60,425
Movement Mortgage	52,902
Guaranteed Rate	48,044
Lennar Mortgage	47,255
Jpmorgan Chase Bank	46,230

Top 5 conventional purchase mortgage lenders in 2023

Mortgage Lender	Mortgages Funded
United Shore Financial Services	152,684
Rocket Mortgage	95,626
Fairway Independent Mortgage Corporation	46,262
Crosscountry Mortgage	46,118
Jpmorgan Chase Bank	44,121

Top 5 FHA purchase mortgage lenders in 2023

Mortgage Lender	Mortgages Funded
United Shore Financial Services	54,508
Rocket Mortgage	26,155
Dhi Mortgage Company	22,234
Fairway Independent Mortgage Corporation	18,507
Crosscountry Mortgage	17,311

Top 5 VA purchase mortgage lenders in 2023

Mortgage Lender	Mortgages Funded
Mortgage Research Center	54,693
United Shore Financial Services	22,196
Navy Federal Credit Union	16,597
Dhi Mortgage Company	11,174
Rocket Mortgage	7,687

Top 5 USDA purchase mortgage lenders in 2023

Mortgage Lender	Mortgages Funded
United Shore Financial Services	1,402
Fairway Independent Mortgage Corporation	968
Guild Mortgage Company	892
Flat Branch Mortgage	798
Crosscountry Mortgage	754

Interesting Mortgage Facts

Origins of the word “mortgage”

The word “mortgage” comes from the Old French term “mort gage,” which means “death pledge.” This refers to the idea that the obligation ends, or “dies”, when the loan is paid off or the property is taken.

The first mortgage company in the United States

The first Savings & Loan bank was established in 1831 in Frankford, Pennsylvania, to help its members obtain mortgages and realize their dream of homeownership.

Mortgage traditions: Bald eagles

Some U.S. homeowners place a winged bald eagle above their door to symbolize freedom from mortgage payments.

Mortgage traditions: Mortgage burning parties

Homeowners sometimes hold “mortgage burning parties” after paying off their home loans, where the physical mortgage paper is burned in celebration.

100-year mortgages

In Japan, banks offer 100-year mortgages, which are designed to last multiple generations.

Methodology

The data for our study was gathered from the FFIEC website, specifically the for 2023, except where noted. Application data is modified by the agency to protect applicant and borrower privacy.

The scope for each mortgage statistic is included within each section. Categorically, we excluded open-ended mortgages with first-lien positions, including home equity line of credit (HELOC) mortgages and reverse mortgages, except where noted.

We collected the mortgage facts on this webpage using database queries. We removed outlier data, mostly linked to mortgage applications that applicants either withdrew or that lenders denied due to incompleteness or fell far beyond typical and expected ranges.

Less than one-half of one percent of HMDA data was excluded for reasonability reasons.

Despite the thorough nature of HMDA data, our study required additional calculations to derive more complex mortgage statistics. Relative percentages and comparison figures required advanced mathematical calculations, which we queried and compiled.

To ensure the accuracy of our study, we relied on the robustness of the HMDA data and the precision of our queries. The stringent data extraction, filtering, and analysis process improved our results’ reliability.

How To Share Our Research

Homebuyer.com makes its mortgage research generally available to help home buyers better understand the mortgage market and to promote decency and fair treatment for all first-time home buyers.

These mortgage facts can be shared across social media platforms, personal blogs, and online forums or used in academic and professional presentations. However, we request that you adhere to the following attribution guidelines while doing so:

Please include highlights from the study only. Do not copy images or tables.
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Link to /research/mortgage-statistics using one of these three terms: “Mortgage Statistics”, “Home Buyer Mortgage Data”, or “Homebuyer.com”.
Avoid misrepresentation by not altering our findings.

By following these guidelines to share this research and these mortgage statistics, we can work together to promote a fair and transparent mortgage lending environment for all home buyers.

For follow-up information and usage rights for our research, please email our team at hello@homebuyer.com.

HMDA Mortgage Statistics: Home Buyer Data By Race, Gender, Ethnicity, & More

Dan Green — Fri, 30 Jun 2023 05:51:01 +0000

Welcome to the 2023 Homebuyer.com Home Mortgage Disclosure Act (HMDA) study.

In our annual home buyer study, we present mortgage statistics parsed from 7.6 million first-lien residential mortgage applications submitted by U.S. home buyers last year and 90.3 million since 2018.

Our data source is the Federal Financial Institutions Examination Council (FFIEC), which collects mortgage application data from U.S. lenders per Regulation C. Data is stripped of personally identifiable information and then sorted by race, gender, ethnicity, and dozens of other criteria.

We encourage you to read our study methodology and cite this study in research, websites, and newscasts. Please use proper attribution as described at the bottom of this article.

HMDA Data For U.S. Home Buyers

As part of our annual study, we answer basic questions about U.S. home buyers and their mortgages, including:

How many home buyers applied for a mortgage?
How many mortgage applications were approved?
How many mortgage applications were denied?

Next, we delve into additional mortgage statistics, such as:

What are mortgage approval rates by demographics?
How much does the average home buyer pay in mortgage origination fees?
How does debt-to-income ratio affect mortgage approval rates?

We include data tables and charts, as appropriate.

What Is The Home Mortgage Disclosure Act (HMDA)?

HMDA (pronounced “HUM-duh”) is short for the Home Mortgage Disclosure Act. HMDA reports are the most comprehensive public database of U.S. mortgage market activity and serve as a fairness check on mortgage lenders and their practices.

HMDA requires lenders to share data about the mortgage applications they take and the mortgage loans they issue. The complete HMDA dataset contains 99 fields per record.

The Federal Financial Institutions Examination Council (FFIEC) and the Consumer Financial Protection Bureau (CFPB) govern HMDA reporting. These agencies require lenders to file annual reports with extensive loan-level details.

This annual study starts with general information and expands into the above five categories to reveal the state of mortgage lending and mortgage market activity nationwide. Data is compiled from the , which are available on the CFPB website.

Home Buyer Mortgage Statistics

How many mortgage applications do consumers make each year?

In 2023, U.S. consumers submitted 7,587,762 mortgage applications, including purchase and refinance requests.

Year	Number of Applications
2018	11,493,286
2019	14,012,821
2020	22,612,525
2021	22,787,074
2022	11,814,562
2023	7,587,762

What percentage of mortgage applications get approved each year?

In 2023, mortgage lenders approved 81.04% of applications received across all loan types, including conventional mortgages, FHA mortgages, VA mortgages, and USDA mortgages.

Year	Approval Rate
2018	81.10%
2019	84.28%
2020	86.81%
2021	86.47%
2022	81.98%
2023	81.04%

How many purchase mortgage applications do home buyers make each year?

Fewer home buyers applied for mortgages in 2023 amid rising mortgage rates and lower new and existing home supply, and the majority of mortgage applications were linked to primary residences. Only 306,259 of applications were for second homes or investment properties.

Year	Number of Applications
2018	7,081,255
2019	7,244,800
2020	7,712,245
2021	8,383,886
2022	7,045,737
2023	5,704,709

How many purchase mortgage applications do lenders approve each year?

Mortgage lenders approved fewer purchase mortgage applications overall in 2023, but mortgage approval rates remain high. Lenders approved 85.76% of mortgages for buyers.

Year	Approval Rate
2018	87.60%
2019	88.50%
2020	88.15%
2021	88.80%
2022	87.04%
2023	85.76%

Mortgage Statistics by Borrower Demographics

The next section of our home buyer study focuses on borrower demographics.

Borrower demographics refer to specific characteristics of mortgage applicants, such as gender, race, ethnicity, and age. We use HMDA data to measure purchase mortgage applications and their outcomes by demographic group.

What is the distribution of purchase mortgages by race (2023)?

The share of non-White home buyers has increased every year since the start of our study. In 2018, non-White home buyers comprised 26.11% of the mortgage market. In 2023, non-White home buyers account for 33.83% of the market.

Race	Relative Share
American Indian or Alaska Native	0.60%
Asian	7.56%
Black or African American	7.77%
Native Hawaiian or Other Pacific Islander	0.18%
White	66.17%
Joint	2.79%
Other	14.93%

What is the average home buyer mortgage loan size by race (2023)?

Asian home buyers borrowed more per mortgage than other racial groups in 2023. American Indian or Alaska Native home buyers borrowed the least. The average loan size for Black or African-American home buyers is 26.5% higher since 2020.

Race	Loan Amount
American Indian or Alaska Native	$293,025
Asian	$505,538
Black or African American	$323,416
Native Hawaiian or Other Pacific Islander	$374,614
White	$347,273
Joint	$447,293
Other	$396,823

What is the mortgage application approval rate by race (2023)?

Mortgage applications from American Indian or Alaska Native home buyers were approved at the lowest rate among 2023. Applications from Asian home buyers were approved most frequently.

Race	Approval Rate
American Indian or Alaska Native	66.91%
Asian	87.01%
Black or African American	68.53%
Native Hawaiian or Other Pacific Islander	72.09%
White	83.43%
Joint	85.27%
Other	76.91%

What is the average mortgage origination fee by race (2023)?

Mortgage origination fees, which is the sum of lender fees minus lender-issued closing cost credits, were highest for American Indian or Alaska Native home buyers, and Black or African American buyers. Origination fees were the lowest for Asian home buyers.

Race	Average Origination Fee
American Indian or Alaska Native	0.877%
Asian	0.508%
Black or African American	0.860%
Native Hawaiian or Other Pacific Islander	0.848%
White	0.798%
Joint	0.696%
Other	0.747%

What is the distribution of purchase mortgages by ethnicity (2023)?

In 2023, home buyers who identify as Not Hispanic or Latino accounted for the majority of the mortgage market. Buyers of Joint ethnicity represented the smallest percentage.

Ethnicity	Relative Share
Hispanic or Latino	12.18%
Joint	3.12%
Not Hispanic or Latino	71.22%
Other	13.48%

What is the average home buyer mortgage loan size by ethnicity (2023)?

Home buyers with Joint ethnicity, which means that the mortgage application includes two or more borrowers claiming different ethnicities, borrowed the most to purchase a home, on average, as compared to other ethnicities in 2023.

Ethnicity	Loan Amount
Hispanic or Latino	$332,826
Not Hispanic or Latino	$365,531
Joint	$409,586
Other	$397,985

What is the mortgage application approval rate by ethnicity (2023)?

Home buyers with Joint ethnicity garnered the highest mortgage application approval rate in 2023. Home buyers of Hispanic or Latino ethnicity received the lowest approval rate.

Ethnicity	Approval Rate
Hispanic or Latino	75.42%
Not Hispanic or Latino	82.66%
Joint	84.46%
Other	77.45%

What is the average mortgage origination fee by ethnicity (2023)?

In 2023, the mortgage origination fee, which is the net lender fee associated with getting a mortgage, was highest for Hispanic or Latino home buyers. Origination fees were mostly the same among other ethnic groups.

Readers should not conclude that home buyers of Hispanic or Latino ethnicity pay more for the same mortgage than other ethnic groupings. Mortgage origination fees often inversely correlate with mortgage rates, and the Home Mortgage Disclosure Act does not require lenders to report mortgage rates.

Origination fees may also be linked to mortgage loan size.

Ethnicity	Average Origination Fee
Hispanic or Latino	1.013%
Not Hispanic or Latino	0.732%
Joint	0.745%
Other	0.738%

What is the distribution of mortgages by age of the home buyer (2023)?

The relative percentage of 2023 home buyers under the age of 25 was its highest since at least 2018. The largest group of home buyers continues to be consumers in the 25-34 age bracket.

Age Group	Relative Share
18-24	6.40%
25-34	32.07%
35-44	26.18%
45-54	16.60%
55-64	11.53%
65+	7.23%

What is the average mortgage loan size by age of the home buyer (2023)?

Home buyers in the 35-44 age group borrowed the most money to purchase a home in 2023. Home buyers under the age of 25 borrowed the least.

Age Bracket	Loan Amount
18-24	$236,218
25-34	$348,394
35-44	$424,344
45-54	$402,005
55-64	$353,271
65+	$302,825

What is the mortgage application approval rate by age of the home buyer (2023)?

Home buyers aged 25-34 were most likely to get their mortgage application approved in 2023, followed by home buyers aged 35-44 and then by home buyers aged 18-24.

Age Bracket	Approval Rate
18-24	80.69%
25-34	85.18%
35-44	81.91%
45-54	78.62%
55-64	77.90%
65+	76.90%

What is the average mortgage origination fee by age of the home buyer (2023)?

In 2023, mortgage origination fees, which is the difference between the mortgage lender fees and mortgage lender credits, were highest for home buyers aged 18-24 and lowest for home buyers aged 25-34.

Readers should not draw conclusions based on HMDA mortgage origination fee data. Mortgage origination fees often inversely correlate with mortgage rates, and the Home Mortgage Disclosure Act does not require lenders to report mortgage rates.

For example, younger buyers may be asking their mortgage lender for lower mortgage rates to achieve a more favorable debt-to-income ratio.

Age Bracket	Average Origination Fee
18-24	0.836%
25-34	0.732%
35-44	0.738%
45-54	0.819%
55-64	0.829%
65+	0.791%

What is the distribution of mortgages by gender of the home buyer (2023)?

In 2023, Female home buyers were listed as the primary mortgage applicant at the highest rate since at least 2018. The Female share of the market has increased every year since that time.

Gender	Relative Share
Male	61.24%
Female	32.75%
Not Provided	5.40%
Not Applicable	0.54%
Both	0.06%

What is the average mortgage loan size by gender of the home buyer (2023)?

Mortgages that listed a Male as the primary mortgage applicant borrowed 17% more compared to mortgages with a Female primary borrower in 2023. The largest mortgages, on average, were granted to home buyers for whom no gender data was provided.

Gender	Loan Amount
Male	$385,407
Female	$330,004
Not Provided	$407,077
Not Applicable	$372,495
Both	$389,814

What is the mortgage application approval rate by gender of the home buyer (2023)?

The mortgage approval rate gap between Male and Female primary borrowers hovered near 3 percentage points for the sixth consecutive year. In 2023, the Female mortgage approval rate was its lowest since at least 2018.

Gender	Approval Rate
Male	82.74%
Female	79.09%
Not Provided	75.04%
Not Applicable	97.27%
Both	75.19%

What is the average mortgage origination fee by gender of the home buyer (2023)?

In 2023, Female mortgage applicants paid the most in mortgage origination fees, which is the sum of all mortgage lender fees minus all mortgage lender credits. Origination fees increased for all groups compared to the year prior.

Fees may also correlate with loan size.

Gender	Average Origination Fee
Male	0.728%
Female	0.848%
Not Provided	0.704%
Not Applicable	0.463%
Both	0.888%

Mortgage Statistics by Borrower Creditworthiness

The next section of our home buyer study focuses on borrower creditworthiness.

HMDA law requires lenders to report three data points linked to creditworthiness: applicant credit score, debt-to-income ratio, and mortgage loan-to-value. These characteristics are also known as the 3 Cs of mortgage lending – credit, capacity-to-repay, and collateral.

Credit scores measure the probability that a person will make on-time payments to their lender
Debt-to-income ratio measures a person’s available monthly cash flow
Loan-to-value measures the size of a home buyer’s down payment

The data in this section shows how creditworthiness affects a home buyer’s opportunity to get a mortgage approved.

What is the home buyer mortgage approval rate by debt-to-income ratio (2023)?

In 2023, the debt-to-income shown on a mortgage application did little to affect its approval rate, except when DTI exceeded 50 percent.

Note: it may appear counter-intuitive that mortgage approval rates were low in 2023 when home buyers’ debt-to-income ratio fell below 20%, but consider that low DTI may be the result of having a limited or no credit history.

Lenders may lack sufficient data to approve those particular mortgages.

Debt-to-Income	Approval Rate
<20%	74.58%
20%-30%	86.78%
30%-36%	88.44%
36%-43%	88.81%
43%-45%	88.41%
45%-50%	87.85%
>50%	71.16%

What is the distribution of mortgages by debt-to-income ratio (2023)?

The majority of U.S. home buyers have a debt-to-income ratio between 36% and 43%. This is consistent with conventional mortgage guidelines. The next most common DTI in 2023 was between 45% and 50%.

Debt-to-Income	Relative Share
<20%	3.95%
20%-30%	13.69%
30%-36%	15.46%
36%-43%	26.21%
43%-45%	12.72%
45%-50%	17.90%
>50%	10.07%

What is the home buyer mortgage approval rate by loan-to-value (2023)?

In 2023, home buyers who applied for a low-down payment mortgage with between 3% down and 5% down were most likely to get their mortgage application approved with an 89% approval rate. Home buyers who put down less than 3 percent down were least likely to be approved.

LTV Bucket	Approval Rate
<60%	78.49%
60-70.00%	80.52%
70.01-80%	84.72%
80.01-90%	84.05%
90.01-95%	86.06%
95.01-97%	89.06%
97.01-100%	77.53%

What is the distribution of mortgages by loan-to-value (2023)?

One-third of mortgages for home buyers in 2023 featured a loan-to-value of 95% or higher, with the majority of loans exceeding 97 percent LTV. More than nine percent of buyers made downpayments exceeding forty percent.

Note that LTV should not be used to find a buyer’s downpayment size because HMDA data does not indicate whether a given mortgage application includes a subordinate lien such as a home equity loan or a HELOC, sometimes called a “Piggyback Mortgage.”

Combined loan-to-value data is unavailable.

Furthermore, HMDA data uses a buyer’s final loan amount, which, for home buyers using an FHA mortgage, reflects their upfront mortgage insurance premium. Therefore, although FHA mortgage guidelines require a 3.5 percent down payment for most borrowers, the loan-to-value on an FHA purchase loan often falls between 97% and 100%.

LTV Bucket	Relative Share
<60%	9.42%
60-70.00%	5.70%
70.01-80%	15.82%
80.01-90%	19.08%
90.01-95%	15.99%
95.01-97%	11.53%
97.01-100%	22.47%

Mortgage Statistics by Loan Characteristics

The following section of our home buyer study examines Loan Characteristics.

HMDA regulations mandate lenders to provide 26 loan-level details about the applications submitted by buyers, including mortgage type, loan amount, and loan term.

Mortgage type is whether a mortgage is a conventional loan, FHA loan, VA loan, or USDA loan
Loan amount is the amount of money borrowed to purchase a home
Loan term is the length of the mortgage loan, in months

The mortgage statistics in this section show how the characteristics of a loan may influence a home buyer’s mortgage approval and interest rate.

What are the most common mortgage loan types used by home buyers (2023)?

Home buyers overwhelmingly chose conventional mortgage financing in 2023. Conventional mortgages are mortgages backed by Fannie Mae or Freddie Mac. FHA mortgages were the next most common loan for home buyers.

This study does not track the use of non-qualified mortgages (non-QM) and other private mortgage lending.

Loan Type	Relative Share
Conventional	68.70%
FHA	19.72%
VA	10.50%
USDA	1.08%

What’s the mortgage approval rate for home buyers by loan type (2023)?

In 2023, USDA mortgage applications for home buyers were approved most often. FHA mortgage applications were approved least often.

Loan Type	Approval Rate
Conventional	81.15%
FHA	78.34%
USDA	86.10%
VA	83.40%

What’s the average mortgage loan size for home buyers by loan type (2023)?

Home buyers using VA mortgages, which are mortgages reserved for eligible members of the military and others, borrowed more money to buy a home in 2023 compared to other buyers using other loan types.

USDA mortgages, which are reserved for home buyers in non-urban areas of the country, borrowed the least to buy a home.

Loan Type	Average Loan Amount
Conventional	$386,076
FHA	$306,748
VA	$375,695
USDA	$185,041

What is the average mortgage loan amount in the United States?

The average mortgage loan amount for purchase loans dropped in 2023 for the first time since at least 2018. Still, the average home buyer’s mortgage amount is $98,000 higher since six years ago.

Year	Average Loan Amount
2018	$269,957
2019	$281,341
2020	$302,884
2021	$346,635
2022	$373,765
2023	$367,173

What is the mortgage loan size distribution for home buyers (2023)?

In 2023, the most common range for loan size was between $200,000 and $299,999, followed by $300,000-$399,999 then $100,000-$199,999.

Fewer than 5 percent of buyers borrowed more than their local mortgage loan limits.

Loan Amount Bucket	Relative Share
<$100k	4.47%
$100k-$199k	18.34%
$200k-$299k	24.91%
$300k-$399k	20.86%
$400k-$499k	12.55%
$500k-$599k	7.16%
$600k-$699k	4.27%
$700k-$799k	2.83%
$800k-$899k	1.08%
>=$900k	3.53%

What is the mortgage loan term distribution for home buyers (2023)?

The 30-year mortgage remains the most common mortgage choice among U.S. home buyers, followed by the 15-year mortgage. These percentages are mostly unchanged year-to-year.

Loan Term	Relative Share
120	0.20%
180	2.00%
240	0.91%
360	93.72%
Other	3.17%

Mortgage Statistics by Property Characteristics

In our study’s Property Characteristics part, we look at how property details play into mortgage statistics. These characteristics include the type, location, and purpose of the property.

Property type refers to the kind of property for which a mortgage is sought. This could be a single-family home, a multifamily property, or a manufactured home. The property type can affect the chances of loan approval and the mortgage interest rate offered.

Another aspect is the property’s location. This can be in a rural, suburban, or urban area. Lenders might look at the property’s location when deciding whether to approve a mortgage. In some cases, they may offer different mortgage rates based on the geography.

The purpose of the property matters, too. The property could be a primary residence, a second home, or an investment property. Lenders often offer different rates and approval criteria based on the property’s purpose.

HMDA rules require mortgage lenders to record details about properties linked to their mortgage applications and funding, including home value, property type, and occupancy.

Home value is the home’s purchase price or appraised value, whichever is lower
Property type is the property’s unit count, from 1-unit to many units
Occupancy indicates whether the home is a buyer’s primary residence, second home, or investment property

What is the distribution of mortgages for primary homes, vacation homes, and investment properties (2023)?

The majority of 2023 mortgages were issued for primary residences. The relative number of mortgages for second homes dropped from 5.29% in 2021 to 2.95% in 2023.

Occupancy Type	Relative Share
Principal residence	93.97%
Second residence	2.95%
Investment property	3.08%

What is the approval rate of mortgages for primary homes, vacation homes, and investment properties (2023)?

Mortgage applications for second homes were approved at the highest relative rate in 2023, followed by applications for investment properties.

Occupancy Type	Approval Rate
Principal residence	80.84%
Second residence	84.90%
Investment property	83.70%

What is the distribution of mortgages for 1-unit, 2-unit, 3-unit, and 4-unit homes (2023)?

In 2023, the percentage of mortgages issued to home buyers of 1-unit homes far exceeded the amount issued to buyers of multi-unit properties. These findings are consistent year over year and may reflect the nature of the U.S. housing stock.

Total Units	Relative Share
1	98.53%
2	1.25%
3	0.16%
4	0.07%

Mortgage Statistics by Lender Identification

In the Lender Identification portion of our study, we explore the role of the lender in mortgage applications. Each lending institution has its strategies, policies, and practices. These factors can affect the approval rates, fees, and interest rates they offer.

Lender Identification is not about individual loan officers but the institutions they work for. Lenders can range from big banks to small credit unions and traditional lenders to online-only platforms.

Some lenders may specialize in certain types of loans or cater to specific borrower demographics.

Understanding lenders’ roles and practices can provide valuable insights for prospective home buyers. In this section, we analyze the HMDA data to reveal the impact of lender identification on mortgage applications and approvals.

How many mortgage companies reported making at least one purchase mortgage?

In 2023, there was a 12.1% increase in the number of mortgage lenders who made at least one purchase mortgage. Note that some mortgage lenders did not make any purchase mortgages in 2023.

Year	Number of Lenders
2018	5,288
2019	5,161
2020	4,204
2021	4,075
2022	4,160
2023	4,665

How are purchase mortgages distributed among mortgage companies (2023)?

In 2023, roughly one-third of purchase mortgages were issued by each of the following groups: the 10 biggest lenders, the next 90 biggest lenders, and the next 900 biggest lenders.

The other 3,600+ mortgage companies accounted for a fraction of the overall market.

Lender Rank Bucket	Total Loans Closed
1-10	819,815
11-100	1,069,650
101-1000	973,364
1001+	233,919

What is the concentration of funded purchase mortgages among mortgage companies (2023)?

As in most years, the 2023 purchase mortgage market resembles an asymptote. Market share drops off sharply after the first few mortgage lenders then extends almost indefinitely toward 0.00% market share.

The first 50 lenders did half of 2023‘s purchase loans. The remaining 4,615 companies did the other half.

Rank	Relative Share
1	7.45%
2	4.18%
3	2.34%
4	2.26%
5	2.01%
6	1.95%
7	1.71%
8	1.55%
9	1.53%
10	1.49%
11	1.30%
12	1.27%
13	1.13%
14	1.08%
15	1.00%
16	0.91%
17	0.84%
18	0.79%
19	0.74%
20	0.70%
21	0.69%
22	0.67%
23	0.65%
24	0.61%
25	0.59%
26	0.58%
27	0.56%
28	0.56%
29	0.56%
30	0.55%
31	0.51%
32	0.48%
33	0.48%
34	0.46%
35	0.44%
36	0.43%
37	0.43%
38	0.43%
39	0.43%
40	0.40%
41	0.40%
42	0.38%
43	0.36%
44	0.36%
45	0.36%
46	0.35%
47	0.35%
48	0.34%
49	0.33%
50	0.32%
Remaining Lenders	49.72%

HMDA Methodology

The data for our study was gathered from the FFIEC website, specifically the Snapshot National Loan Level Dataset. These Snapshot files contain national HMDA datasets from all HMDA reporters. The data was modified by the Bureau to protect the privacy of the applicant and borrower.

To keep our study focused, we filtered the data specifically for home buyers. We removed mortgage applications for purposes other than buying a home, including home construction and refinancing, except where explicitly noted. We limited the study’s scope to properties with 1-4 units. We did not include open-ended mortgages in first-lien positions including home equity line of credit (HELOC) mortgages, and excluded reverse mortgages from our analysis.

Our analysis was performed using database queries. This allowed us to efficiently sift through large datasets and pull out the most relevant information. We removed outlier data, mostly linked to mortgage applications that applicants either withdrew or that lenders denied due to incompleteness, or that fell outside of typical and expected ranges.

Less than one-half of one percent of HMDA data was excluded for reasons of reasonability.

Despite the completeness of the HMDA data, our study required additional calculations to answer more complex questions. Relative percentages and comparison figures were derived from more advanced calculations.

To ensure the accuracy of our study, we relied on the robustness of the HMDA data and the precision of our database queries. The stringent process of data extraction, filtering, and analysis contributed to the reliability of our results.

How To Use & Share Our Research

Homebuyer.com conducts HMDA mortgage data research to help home buyers understand the mortgage market, and to promote decency and fair treatment for home buyers.

Our detailed findings can be shared across social media platforms, personal blogs, and online forums or used in academic and professional presentations. However, we request that you adhere to the following attribution guidelines while doing so:

Include highlights from the study only. Do not copy images or tables.
Include a link to the complete study on the Homebuyer.com website.
Link to this page URL using “Mortgage Statistics”, “HMDA Mortgage Data”, or “Homebuyer.com”.
Avoid misrepresentation by not altering our findings.

By sharing our HMDA mortgage data study and following these guidelines, we can work together to promote a fair and transparent mortgage lending environment for all home buyers.

For follow-up information and usage rights for our research, please email press@homebuyer.com. We are happy to help you do more with the data, including running custom queries to assist with personal, professional, or educational research.

The Complete Guide to Mortgage Pre-Approvals

Dan Green — Wed, 18 Sep 2024 17:02:58 +0000

Buying your first home is a major financial milestone, and securing a mortgage pre-approval is a key step. A pre-approval clarifies how much home you can afford and strengthens your position as a serious buyer.

This guide breaks down mortgage pre-approvals, how long they last, how they affect your credit, and the difference between pre-qualification and pre-approval. Whether you’re starting your search or getting ready to make an offer, this guide will help you navigate the process with confidence.

What is a Mortgage Pre-Approval?

A mortgage pre-approval is when a lender reviews your financial details—such as your credit score, income, and assets—to determine how much home you can afford. It also provides an estimate of your interest rate and monthly payments, allowing you to plan your budget.

Once pre-approved, you’ll receive a pre-approval letter. This letter shows sellers that you’re financially qualified to purchase a home.

According to , homebuyers who are pre-approved are taken more seriously by sellers and are more likely to have their offers accepted.

Pre-Approval vs. Pre-Qualification

Many first-time homebuyers confuse pre-approvals with pre-qualifications. The mortgage terms “pre-qualification” and “pre-approval” are not interchangeable.

A pre-qualification is a mortgage approval based on self-reported information. It doesn’t verify a buyer’s credit score, income, or money in the bank. Pre-qualifications are estimates only.

A pre-approval is mortgage approval based on verified data. It uses credit reports, job data, and bank information to confirm how to approve your loan and for how much money.

Needless to say, pre-approvals are for serious home buyers, and many home buyers choose to get pre-approved before searching for homes. Pre-approvals signal to sellers that you’re a motivated buyer who can afford to buy their home.

What is a Mortgage Pre-Qualification?

A mortgage pre-qualification is an estimate of your ability to borrow money. It’s a shortcut for lenders and buyers to assess whether your mortgage will be approved.

The five questions in a first-time home buyer pre-qualification are:

Where do you live now and what is your rent?
What is your annual household income?
What is your credit rating?
Have you had a recent bankruptcy?
Do you plan on making a downpayment?

Home buyers can answer the pre-qualification questions with the truth, lies, or an in-between version. The lender will not verify the information provided nor ask for proof.

Pre-qualifications are unverified estimates of a person’s home-buying power.

The advantage of getting pre-qualified is that it’s quick. The disadvantage is that pre-quals are inaccurate, unhelpful, and set poor expectations – especially for first-time home buyers.

Pre-qualifications are appropriate when buying a home with bad credit or with some other job or credit anomaly.

What is a Mortgage Pre-Approval?

A mortgage pre-approval verifies that a buyer can purchase and finance a home.

Pre-approvals are reliable. They consider a buyer’s credit, income, and assets; and use that information to approve a mortgage conditionally.

A mortgage pre-approval verifies six things:

Your name, address, and phone number
Your credit score and credit history
Your income and employment history
Your assets and savings
Your citizenship and eligibility
Your debts and remaining loan payments

With pre-approvals for VA loans, lenders will also verify VA benefits eligibility. For USDA mortgages, they’ll verify USDA property eligibility.

Mortgage pre-approvals use and, when digital data is unavailable, lenders verify with W-2s, paystubs, tax returns, and personal bank statements.

When your mortgage is pre-approved, you know exactly how much home you can afford to buy and for what mortgage rate you’re expected to qualify. You’ll also get a verified estimate of your mortgage closing costs and a projection of your monthly payments.

Lastly, pre-approved home buyers receive a pre-approval letter, sometimes called a Verified Approval Letter. A Verified Approval Letter tells home sellers that you, as the buyer, can purchase and finance their home.

Pre-Approval	Pre-Qualification
Verifies income, employment, and credit	Based on self-reported estimates
Provides a verified loan amount	Offers an estimate of buying power
Accepted by home sellers	Not typically accepted by sellers
Strengthens your offer	Weaker signal to sellers

A pre-approval is the better option for serious buyers. Pre-qualifications may help in the planning stage, but pre-approvals are essential for making an offer.

Is A Pre-Approval The Same as Cash?

Generally, pre-approved mortgages are as good as gold and guaranteed to be approved when a final mortgage approval is sought. Pre-approved mortgage applications are rarely denied in underwriting because they are, quite literally, pre-approved.

However, there are reasons why a pre-approved offer may be rescinded, including:

1. A big change in your credit score

If your credit score falls below the minimum required credit score for approval, your pre-approval could be revoked.

Current minimums by mortgage program are:

620 for conventional mortgages
500 for FHA mortgages
580 for VA loans
620 for USDA mortgages

2. A big change in your debt-to-income ratio

If your household income drops or your household debt levels climb, your debt-to-income (DTI) ratio may exceed mortgage approval maximums. Current maximums by mortgage program are:

for conventional mortgages
50% for FHA mortgages
None for VA loans
44% for USDA mortgages

3. A big change in your employment type

If your employment type or job title changes, it could affect how your income is calculated on an approval. Even if you get a pay raise, any of the following changes could nullify your mortgage pre-approval:

Becoming a partner in a company
Starting a new business
Switching from a salaried position to a salary + bonus position
Changing industries
Accepting payment in cryptocurrency

If you plan to make a career change while buying a home, speak with a mortgage company first to avoid unintended consequences.

4. A big change in your expected monthly payment

Mortgage pre-approvals are a dress rehearsal for a buyer’s final mortgage approval, and use an estimated PITI based on expected purchase price, mortgage rate, and taxes and insurance.

If a buyer purchases a home with larger-than-expected real estate taxes or a condo with higher-than-expected monthly assessments, the new projected payment could exceed the pre-approved amount.

How Long Does a Mortgage Pre-Approval Last?

Most mortgage pre-approvals are valid for 90 days.

After 90 days, if you haven’t found a home, your pre-approval will expire. You can easily refresh your pre-approval by contacting your lender and providing updated documents. Refreshing your pre-approval ensures you’re ready to make a strong offer when the right home comes along.

How to Get a Mortgage Pre-Approval

Getting pre-approved for a mortgage is a quick and straightforward process that can often be completed in minutes on the Homebuyer.com website, or may take longer if you work with a lender by phone.

To get pre-approved, your lender will ask for financial information. Gathering documents in advance will speed up the process – unless you use the Homebuyer.com mortgage application center, which can be entirely document-free.

1. Calculate a mortgage payment you’re comfortable making

Evaluate your household budget and decide how much you want to spend each month on housing.

Do you want to spend the same amount you’re spending now?
Are you comfortable adding to your monthly housing budget?
Do you just want to know the maximum amount a lender will approve?

Your housing payment relative to your monthly income is known as your front-end ratio.

Generally, a home buyer with credit card debt and student loans should aim for a front-end ratio not to exceed 35 percent. A home buyer with no other debt can push their front-end ratio higher.

2. Create a digital folder of financial documentation

A mortgage pre-approval verifies your household income, bank and retirement assets, and credit history to issue a mock mortgage approval for a home.

Homebuyer.com’s self-serve mortgage approval verifies documentation automatically. For home buyers using a brick-and-mortar mortgage company instead, gathering documentation in advance and storing it in a digital data room is imperative.

A well-built mortgage data room will include all of the following:

Clear front and back images of your driver’s license or ID card
W-2 statements from the last two years
Federal tax returns from the last two years
Pay stubs covering at least the last one month of income
Bank statements from the last two months
Retirement statements from the last months

If you meet the definition of first-time home buyer, include proof of on-time rental payments for the last 12 months and your landlord’s contact information. Include all applicable agreements if you pay or receive child support or alimony.

3. Identify up to 5 competing mortgage companies

Pre-approved buyers get better outcomes than general buyers, and mortgage companies do pre-approvals at no cost and with no obligation. Therefore, you have no reason to skip this important step.

If you don’t know a mortgage company to use or how to get started, talk to a friend for recommendations, ask your real estate agent for referrals, or simply respond to trustworthy online ads. And don’t just stop at one pre-approval.

A showed that home buyers who talk to two or more mortgage companies save money on their mortgage, so talk to multiple mortgage companies and compare your mortgage choices.

4. Request your mortgage pre-approval

Now that you have a list of mortgage companies to contact, contact them in succession. Use your digital data room to share documentation and speak with a loan officer by phone if that’s your preferred method of communication.

Getting your pre-approval will take a few minutes or a few days, depending on your application method.

The fastest way to get a mortgage pre-approval is to use a self-serve mortgage approval company. Self-serve mortgage applications securely verify, underwrite, and approve your mortgage in real time, 24/7.

Homebuyer.com gives home buyers in about five minutes.

The standard method is to give a mortgage application online and upload financial documents to a website. Generally, a loan officer will confirm your information and issue a pre-approval after a verification phone call.

The slowest method is to schedule an in-person interview with a bank employee. Interviews are restricted to banking hours, and loan officers often need 3-5 days to review an application. Follow-up meetings may be required.

Freddie Mac Study: How Much Home Buyers Save By Comparison Shopping Lenders

Competing Lenders	Average Interest Rate Saving	30-Year Savings at Today’s Average 6.25% Mortgage Rate
1 Lender	0.00%	$0
2 Lenders	0.082%	$3,830
3 Lenders	0.121%	$5,648
4 Lenders	0.147%	$6,858
5 Lenders	0.166%	$7,744

Data: Freddie Mac

How Mortgage Pre-Approvals Affect Your Credit Score

Getting pre-approved for a mortgage requires a hard credit inquiry, which might lower your credit score by around 5 points. This is a small, temporary impact.

Lenders use hard inquiries to check your full credit report, which helps them assess the risk of lending to you.

Hard inquiries differ from soft inquiries, like when you check your own credit score or when companies offer you pre-qualified credit card deals.

Soft inquiries don’t affect your score.

Hard credit pulls have a minimal effect

The good news is that this dip in your credit score from a hard credit pull is usually small and short-lived.

If you have a healthy credit history, the corresponding drop is unlikely to affect your ability to qualify for a mortgage with favorable terms.

For most buyers, the benefits of getting pre-approved—like knowing your exact budget and being ready to make an offer—outweigh the minor effect on your credit score.

Shop for rates without harming your score

If you’re comparing mortgage rates from multiple lenders, you might worry about multiple hard inquiries lowering your score further.

Fortunately, credit bureaus have built protections for consumers.

FICO scoring models use a 45-day window, where multiple mortgage inquiries are This level of protection lets home buyers shop around for their best mortgage terms without worrying about harming their score.

You can keep your credit score high after a pre-approval

Once you’ve been pre-approved, maintain a high credit score by not opening new credit accounts, increasing your debt, or missing monthly payments. Lenders will verify your credit before closing so keeping your finances stable ensures a smooth closing process.

A pre-approval puts you in a strong position to buy a home, and managing your credit afterward ensures you stay on track.

4 Main Benefits of Getting Pre-Approved Before House Hunting

Getting pre-approved offers several advantages. Here are four key reasons why obtaining pre-approval before house hunting can significantly help in your home-buying journey:

1. Provides Accurate Credit Checks

A mortgage pre-approval involves a hard credit inquiry, which gives lenders a precise view of your creditworthiness. Unlike free credit tools, a pre-approval uses verified data to determine your eligibility for a home loan.

If your credit score doesn’t meet the necessary requirements, the pre-approval process will reveal the areas that need improvement, giving you time to raise your score before making an offer on a home.

2. Establishes Buyer Credibility

Without a pre-approval, sellers and real estate agents may not take your offers seriously. A pre-approval is a formal assessment of your financial status, showing sellers that you’re ready to buy and can afford the property.

In some competitive markets, pre-approval may even be required before viewing homes.

3. Helps You Set an Accurate Budget

A pre-approval outlines the maximum loan amount you’re approved for, as well as estimated interest rates, monthly payments, and closing costs. This comprehensive estimate helps you create a realistic budget for your home search.

With this information, you’ll know how much of a down payment is required and can narrow your home search to properties within your financial range.

4. Defines How Much You Want to Borrow

A pre-approval may qualify you for more than you wish to borrow. However, it’s essential to determine a comfortable monthly payment and stick to a budget that aligns with your financial goals, even if you’re approved for a larger loan amount.

Use the pre-approval to guide your home search toward properties that fit within your desired spending range.

When to Get Pre-Approved

Getting pre-approved at the start of your home-buying journey is an advantage.

Pre-approvals provide a clear picture of what you can afford, helping you avoid the disappointment of falling in love with homes outside your budget.

When you know what you can afford, you can narrow your home search to properties meeting your financial situation. Plus, the earlier you get pre-approved, the more time you’ll have available to fix financial or credit-related surprises.

You’ll also have a pre-approval in hand to act quickly and be competitive in the market.

Common Questions �� Mortgage Pre-Approvals

Is a Mortgage Pre-Approval the Same as a Final Mortgage Approval?

No, a pre-approval is conditional based on the information you provide. Final approval happens after your lender verifies all details and you have a home under contract.

Can a Mortgage Pre-Approval Be Denied?

Pre-approvals can be revoked if your financial situation changes—such as a drop in your credit score or an increase in debt. Keep your finances stable throughout the home-buying process to avoid issues.

How Long Does It Take to Get Pre-Approved?

Most lenders can provide a pre-approval within minutes to a few hours if all necessary documentation is submitted. Traditional banks may take longer—several days to process your application.

What Happens if My Pre-Approval Expires?

If your pre-approval expires, contact your lender to refresh it. You will need to provide updated financial documents to get a new pre-approval letter.

What’s the difference between a mortgage pre-approval and a mortgage pre-qualification?

Pre-approvals are acceptable proof of a home buyer’s purchase credentials, whereas pre-qualifications are weak estimates based on self-reported income. Buyer’s agents will work with pre-approved buyers only, and sellers won’t accept offers from pre-qualified buyers.

How far in advance should I get my mortgage pre-approved?

The ideal time to get a mortgage pre-approved is one year before your purchase date because one-third of credit reports . Credit reporting errors harm your ability to buy a home at mortgage rates. Pre-approvals reveal those errors and give you time to fix them.

Pre-approvals also establish your price range for buying a home. With a valid pre-approval, buyers are less likely to overspend or underspend on their home.

Does getting pre-approved for a mortgage hurt your credit score?

According to credit bureau Experian, getting a mortgage pre-approval will lower a home buyer’s credit score by about five points, which is a negligible amount to many buyers.

How long does a mortgage pre-approval last?

Mortgage pre-approvals are valid for 90 days or until mortgage rates change by more than 100 basis points, whichever comes first. Pre-approvals are also invalidated when a buyer changes jobs, income, or residence; or experiences an atypical drop in credit score.

Mortgage 101: Basics Every Home Buyer Should Know

Dan Green — Tue, 02 Nov 2021 10:16:00 +0000

For renters, there are more ways than ever to buy your first home.

The government has expanded its low- and no-down payment mortgage coverage, and several bills in Congress propose grants and federal tax credits to first-time home buyers.

This Mortgage 101 guide explains concepts, strategies, and action plans you’ll need to stop renting and start owning.

What Is a Mortgage?

A mortgage is a loan used to finance a home.

to buy homes. Mortgages are popular because few home buyers have hundreds of thousands of dollars in their bank account.

The majority of mortgages pay off over 30 years.

Before we go deep into your mortgage education, let’s review a few key mortgage terms:

Lender: the company that funds your mortgage loan
Borrower: the person receiving the mortgage loan — you!
Down payment: the amount of cash you bring to the transaction. Down payments may be described in dollar terms (e.g., $10,000) or as a percentage of the home’s sale price (e.g., 3 percent)
Loan amount: the amount of money still owed on your mortgage loan. Loan amounts are sometimes called principal.
Loan term: the amount of time you have to pay back your loan. Loan terms are expressed in years (e.g., 30 years, 15 years) or months (e.g., 360 months, 180 months).
Interest rate: The borrowing rate on your mortgage.
Fannie Mae & Freddie Mac: the two government organizations that support most first-time home buyer mortgages.

How Does a Mortgage Work?

Mortgage loans are like other loans in your life. You borrow some amount, you get an interest rate at which to pay it back, and there’s a schedule to make your monthly payments.

Mortgage payments are due on the first of each month. Lenders grant a 15-day grace period, then late fees are assessed. Many homeowners use their lender’s autopay features to prevent late payments.

You don’t need a bank account or a pre-existing banking relationship to get a mortgage loan. You can get a mortgage loan at any of the following places:

Local retail bank branches, such as Chase or Wells Fargo
Neighborhood mortgage companies, such as Cross Country Mortgage or Caliber Home Loans
Online mortgage lenders such as Rocket Mortgage or Homebuyer.com / �� Home Mortgage

Learn more about the differences between mortgage lenders, brokers, and banks.

It’s always good to start your application early — even before you find your first home.

Studies show that home buyers who learn about mortgages get lower rates than those who do not. Educated buyers often pay fewer closing fees, too.

5 Types of Mortgages

The U.S. government created the modern mortgage market in the 1930s. Today, there are five basic mortgage types, each with different qualifying rules.

Conventional mortgages
FHA mortgages
USDA mortgages
VA mortgages
Portfolio mortgages

Let’s look at all five options.

Conventional Loans

Conventional loans are usually best for home buyers with salaried or hourly income, some amount of money saved up, and good credit. Conventional loans require a minimum three percent down payment. For smaller down payments, private mortgage insurance (PMI) may be required.

Eighty-one percent of first-time home buyers use conventional mortgage loans, so you probably will, too.

FHA Loans

FHA loans are a fallback option for first-time buyers who fall short of the conventional loan requirements. FHA mortgages allow down payments as low as 3.5 percent and credit scores down to 500.

Approximately 10 percent of first-time home buyers use FHA mortgage loans. They’re popular with home buyers who purchase multi-unit homes for house hacking.

VA Loans

VA loans are loans backed by the Department of Veterans Affairs. Created as part of the G.I. Bill in 1944, VA loans are available to current and past members of the U.S. military. VA loans don’t require a down payment nor mortgage insurance.

from standard VA closing costs.

USDA Loans

USDA loans are guaranteed by the U.S. Department of Agriculture and designed to promote homeownership in rural and low-density areas. USDA loans are 100 percent mortgages with subsidized interest rates. Home buyers must be of modest means to use the program and purchase a modest home for the area.

Portfolio Loans

Portfolio loans are loans that mortgage lenders make and hold on their balance sheets (i.e., in their portfolios). Government groups don’t back portfolio loans so mortgage guidelines vary by lender. Each lender makes its own rules. Jumbo mortgages are a type of portfolio loan. In general, getting a portfolio loan requires better-than-average income and credit.

See home loans for first-time buyers.

How Do Mortgage Rates Work?

Twelve factors make up your mortgage rate.

Some factors are within your control, such as the state in which you buy your home and your FICO credit score. Other factors are outside your control, such as Wall Street’s attitude on mortgage markets.

The starting point for all mortgage rates is a Wall Street instrument called mortgage-backed securities (MBS).

Mortgage-backed securities are bonds that trade Monday through Friday, from 8:00 AM to 4:00 PM ET. As bond prices change, so do mortgage rates, and bond prices are unpredictable.

However, mortgage bonds are denominated in U.S. dollars, so there are two basic rules:

When the U.S. dollar is strong, mortgage rates tend to fall
When the U.S. dollar is weak, mortgage rates tend to rise

During periods of low inflation and political stability, the U.S. dollar tends to be strong. That’s good for U.S. mortgage rates. Economic instability, on the other hand, is not.

Mortgage lenders reserve the best mortgage rates for home buyers with high-tier credit scores — 740 and higher. Then, for every 20 points that your credit score drops, mortgage rates often edge higher.

Your mortgage rate is also affected by:

The state you buy your home in
The size of your mortgage loan
The number of years in your loan term

How Often Do Mortgage Rates Change?

The price of mortgage-backed bonds, which are securities bought and sold on Wall Street, determine mortgage rates. Mortgage rates can change anytime the mortgage-backed bond market is open.

Mortgage rates change at least once daily — at the market open. Rates change again when markets are volatile. Several times in the last few years, mortgage rates changed five times in one day, which is challenging to navigate.

When mortgage rates change, open offers for mortgage rates expire. A lender won’t give you yesterday’s rates like a stockbroker won’t give you yesterday’s stock price.

So, when you get a mortgage rate offer you’re comfortable with, lock it.

What Is The Difference Between A Fixed-Rate Mortgage and an Adjustable-Rate Mortgage?

Over the life of the loan, the interest rate on a fixed-rate mortgage doesn’t change — the interest rate on an adjustable-rate mortgage (ARM) can.

For many home buyers, adjustable-rate mortgages are inappropriate. Hence, fewer than five percent of buyers used ARMs over the last ten years.

Here’s how most ARMs work.

Your mortgage is assigned a teaser interest rate over the first set of years, usually five.
After the teaser period ends, your interest rate adjusts annually based on a predetermined formula.
After 30 years, the principal is paid in full, and no more payments are due.

ARMs may show savings in their first few years, but those savings can change once the teaser period ends.

Rules govern ARM interest rates. They can only move a few percentage points per year and can never move more than six points in their lifetime.

Fixed-Rate Mortgage	Adjustable-Rate Mortgage
Interest rate never changes	Interest rate changes expires
Mortgage payments are predictable	Mortgage payments are unpredictable
May have lower mortgage fees	May have a lower beginning mortgage rate

What Is a Mortgage Pre-Approval?

A mortgage pre-approval is a dress rehearsal for your actual mortgage approval. Pre-approvals serve three critical functions.

They help you determine how much house you can afford.
They show home sellers you’re qualified to purchase their home.
They reveal potential improvements in your application to get you a better mortgage rate and terms.

Getting pre-approved for a mortgage is different from getting pre-qualified for one.

When you get pre-approved, a mortgage lender reviews your income, assets, and credit report as if you were purchasing an actual home at a specific sale price.

Mortgage pre-approvals are as close as possible to an actual mortgage approval without making an offer. By contrast, pre-qualifications are not close at all.

Pre-qualifications are like credit card offers in your mailbox. There are no verifications or little quality control. Pre-qualifications are worthless PDFs, and sellers don’t accept them as evidence that you’re credit-worthy.

What Do You Need for Mortgage Approval?

Getting a mortgage approval is a cinch after you’re pre-approved.

The specific items you’ll need for your approval will vary based on your mortgage type and how you’re employed. For example, conventional mortgages may ask for two recent pay stubs to show evidence of income. Portfolio mortgages may ask for copies of your federal tax returns.

If you’re salaried, your lender may call your employer to verify your employment. If you’re self-employed, you may be asked to provide an updated profit-and-loss statement with evidence you’re still in business.

If you meet the following criteria, your mortgage approval will usualy be quick and inexpensive.

You’re a first-time home buyer
You’re buying a home from a person (i.e., not a builder or corporation)
You’re salaried at your job and don’t own the company
You’re making a down payment of at least three percent
You have a decent history of paying your bills and rent on time

Your mortgage approval may require evidence of assets, landlord contact information, recent W-2s, tax returns, and more if these trait don’t describe you.

Your mortgage lender will make a mortgage approval checklist for you. Most mortgage loans are approved in a few days.

What Is a Mortgage Loan Limit?

Mortgage loan limits are the upper bounds at which government-backed mortgage groups back U.S. buyers.

Loan limits vary by U.S. county and are expressed in dollar terms. Mortgage loan limits are lower in areas where home prices are more affordable. They’re higher in areas with higher home prices.

They also vary by home type.

A one-unit home such as a detached single-family residence or condominium will have a lower mortgage loan limit than a 2-unit home in the same state and county.

Nationwide, there are 3,233 designated counties. The 2025 conventional mortgage loan limits are:

1-unit home: $806,500
2-unit home: $1,032,650
3-unit home: $1,248,150
4-unit home: $1,551,250

The remaining five percent of counties are High-Cost Areas. Loan limits can range as much as 25 percent higher in cities including San Francisco, Los Angeles, and New York City.

1-unit home: $1,209,750
2-unit home: $1,548,975
3-unit home: $1,872,225
4-unit home: $2,326,875

Mortgage loan limits are reviewed and updated annually, usually during the last week of November. New loan limits go into effect on January 1 each year.

Mortgage loans exceeding local loan limits are known as jumbo loans. These fall into the category of portfolio mortgages.

What Credit Score Is Needed To Buy a House?

You can buy a home with no official credit rating. Still, the best mortgage rates are for buyers with high credit scores and an excellent financial history.

Minimum Credit Score by Loan Type
Conventional Loan	620
FHA Loan	500
VA Loan*	580
USDA Loan*	620
Jumbo Loan	Varies by Lender
*No official credit score minimums. Minimums enforced by lenders.

Mortgage credit scores are different from auto loan credit scores or Credit Karma scores. Mortgage credit scores are based on an algorithm called the model, which is why lenders refer to your score as a FICO.

Your FICO score is a probability statistic scored from 300-850. The higher your score, the more likely you will make on-time payments for the next 90 days. And, if you know how the system works, you can boost your score to get a lower rate.

Your credit score considers five components:

Your history of making payments on time
How little of your credit you’re utilizing
The types of credit you’ve managed in your lifetime
The number of years you’ve managed credit
Whether you recently sought out new credit

Payment history and credit utilization account for 65 percent of your overall score. The best way to boost your credit is to pay your bills on time and keep your credit usage down.

Your credit behavior changes will reflect in your score after 30 days, then again after six months. You can increase your score by 100 points or more with diligent effort. Raising your score one hundred points can lower your mortgage rate by one percentage point or more.

Mortgage FAQs

Now that you’ve learned the mortgage basics, here are answers to other common questions:

What salary do you need to qualify for a mortgage?

Mortgage loans are approved considering affordability and don’t have specific salary requirements.

In general, you may qualify for a mortgage so long as you’re not obligating more than 40-45 percent of your household’s monthly gross income to debt. There are exceptions to this guideline.

What are good mortgage terms?

The 30-year mortgage term is the most popular choice for affordable monthly payments. A 15-year term is also suitable for long-term financial savings and a lower interest rate.

Consult with a mortgage lender to determine which loan term best fits your situation and financial goals.

What is the difference between pre-qualified and pre-approved?

Mortgage pre-qualification isn’t as desirable as pre-approval. Pre-approvals include a credit check and prove your buying power to sellers. Pre-qualifications can provide insight into your financial situation but won’t help you buy a house.

Neither status is a guarantee of loan approval.

What is mortgage insurance?

Mortgage insurance protects your lender if you’re unable to meet contractual obligations. Mortgage insurance may be required depending on your loan choice, down payment, and lender.

There are four types of mortgage insurance available to choose from. Contract length and payment options vary by contract.

What’s the difference between a mortgage cosigner and co-borrower?

A co-borrower owns an equal part of the property along with the buyer. Cosigners hold no homeownership. Learn more about using a mortgage cosigner to buy a home.

What Are Mortgage-Backed Securities?

Dan Green — Sun, 19 Nov 2023 15:29:48 +0000

Mortgage-backed securities (MBS) are investment products based on groups of mortgage loans, which play a significant role in determining mortgage rates.

A Longer Definition: Mortgage-Backed Securities

Mortgage-backed securities (MBS) are investment products created by bundling mortgages from homeowners and then selling shares of the bundle to investors worldwide. Also known as mortgage-backed bonds, mortgage-backed securities directly influence current mortgage rates through their relationship with the supply and demand of mortgage funds.

When lenders make mortgages for home buyers and refinancing homeowners, they often sell them to government-backed agencies like Fannie Mae and Freddie Mac, who pay cash to the lenders for the loans. When lenders get paid, it re-supplies their reserves, which allows them to make more mortgages to first-time home buyers and others.

Meanwhile, Fannie Mae, Freddie Mac, and other buyers of mortgages group the loans they buy into bonds that are backed by the mortgages and sold to institutional investors, including pension funds, large companies, and .

MBS investors are buying bonds. A given bond’s interest rate is the average of the mortgage rates inside them. In this way, mortgage-backed securities affect U.S. mortgage rates.

Interest rates may increase when demand for mortgage-backed bonds is low, or investors might stop investing in mortgage-backed bonds. Conversely, interest rates can drop when demand for mortgage-backed bonds is high.

This is part of how the Federal Reserve and mortgage rates are linked, if only indirectly.

Mortgage-Backed Securities: A Real World Example

Imagine a scenario where inflation pressures are falling, spurring high demand for mortgage bonds from worldwide investors, including pension funds and insurance companies. As demand for mortgage bonds rises, the price of mortgage-backed bonds rises because demand is growing faster than supply.

Bond prices and bond yields move in opposite directions, so as prices rise, mortgage rates fall, which makes homeownership more affordable for first-time home buyers and others.

Frequently Asked Questions �� Mortgage-Backed Securities

How do mortgage-backed securities affect mortgage rates?

Mortgage-backed securities affect mortgage rates through their impact on the supply and demand of mortgage funds. High demand for mortgage-backed securities lowers their yield, lowering mortgage rates.

Why are mortgage-backed securities important for the housing market?

Mortgage-backed securities are important because they provide liquidity to the housing market, allowing banks to issue more mortgages. They also influence mortgage rates, which directly impact homebuying and refinancing activities.

Can changes in mortgage-backed securities prices impact the economy?

Yes, changes in mortgage-backed securities prices can significantly impact the economy, mainly through their influence on mortgage rates and, consequently, the housing market.

Who benefits from lower mortgage rates due to high demand for mortgage-backed securities?

Homebuyers and homeowners looking to refinance benefit from lower mortgage rates resulting from high demand for mortgage-backed securities, making borrowing more affordable.

What role did mortgage-backed securities play in the economic crisis of 2008?

The economic crisis of 2008 was partly fueled by the proliferation of mortgage-backed securities backed by higher-risk mortgages. When these mortgages defaulted at a higher-than-expected rate, it led to significant losses for MBS investors and contributed to the collapse of major financial institutions.

Why does the Federal Reserve buy mortgage-backed securities sometimes?

The Federal Reserve buys mortgage-backed securities to influence the economy. By purchasing MBS, the Fed helps to lower mortgage interest rates, which supports the housing market and the broader U.S. economy.

What is a Conventional Mortgage?

Dan Green — Sun, 17 Dec 2023 19:46:39 +0000

A conventional mortgage is a home loan backed by Fannie Mae or Freddie Mac, the two government agencies that make up the Federal Housing Finance Agency (FHFA).

A Longer Definition: Conventional Mortgage

Conventional mortgages, broadly, are mortgages backed by government agencies Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are the two mortgage entities that make up the Federal Housing Finance Agency.

Conventional mortgages are split into two categories: Conforming and Non-Conforming.

A conforming mortgage is a conventional mortgage that conforms to the FHFA’s published mortgage guidelines and falls within conforming mortgage loan limits for the area. After a conforming mortgage is originated for a home buyer, the mortgage is routed through Fannie Mae or Freddie Mac and then purchased on Wall Street as mortgage-backed securities.

A non-conforming mortgage is a conventional mortgage that exceeds loan mortgage loan limits and, therefore, cannot be purchased by the FHFA. Non-conforming mortgages are commonly called jumbo mortgages.

The FHFA modifies conforming mortgage loan limits annually to match changes in its House Price Index, a home-value tracker that measures home prices in more than 3,100 local markets.

The current conforming loan limit for single-family homes, including detached homes, townhomes, and condos, is $806,500 and ranges up to in high-cost areas of the country.

3,442,038 people used conventional mortgages to buy a home last year. Other conventional mortgage statistics include:

The conventional mortgage market share was 69.70%
The average conventional loan size was $402,642
98.6% of home buyers using a conventional mortgage purchased a 1-unit home

Conventional mortgages are commonly available with 30-year, 20-year, 15-year, and 10-year fixed-rate options and adjustable-rate options, including 3-year, 5-year- and 7-year ARMs.

Who Qualifies for a Conventional Mortgage?

To qualify for a conventional mortgage, first-time home buyers must meet Fannie Mae’s or Freddie Mac’s eligibility standards, which are nearly identical for buyers of 1-unit homes, including detached houses, condominiums, townhomes, and row homes.

Home buyers must make a down payment of at least 3 percent
Home buyers must have a verified source of income
Home buyers must have a minimum credit score of 620
Home buyers may not have a recent foreclosure, short sale, or bankruptcy
The mortgage loan size must be within local mortgage loan limits
Homes must be structurally sound and habitable

In rare scenarios, a home buyer will be approved for a conventional mortgage despite not meeting official mortgage standards.

Conventional mortgages require home buyers to have a social security number or valid Individual Taxpayer Identification Number (). Permanent and non-permanent resident aliens are eligible for conventional mortgages at the same terms as U.S. citizens.

Conventional mortgages are the most widely used mortgage program nationwide. More home buyers use conventional mortgages than all other mortgage types combined.

Chart: Conventional Mortgage Rates Since 2000

Homebuyer.com uses the FRED® API but is not endorsed or certified by the Federal Reserve Bank of St. Louis.
Data: Optimal Blue. Do not reprint without permission. Optimal Blue, 30-Year Fixed Rate Conforming Mortgage Index [OBMMIC30YF], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/OBMMIC30YF, May 9, 2025.

Popular Conventional Mortgage Programs

Standard Conventional Mortgage: Good for Home Buyers With 5% Down Or More

The standard conventional mortgage is the no-frills mortgage loan most home buyers use. It’s the default mortgage option for home buyers who cannot use a VA mortgage because they never served in the military or a USDA mortgage because they’re not buying in an area on the USDA map.

The most common conventional mortgage is the 30-year fixed-rate mortgage. The typical first-time home buyer makes a downpayment less than twenty percent.

HomeReady: Good for Low-To-Moderate Income Home Buyers

HomeReady is a Fannie Mae affordable homeownership program for low-to-moderate-income households. HomeReady lets first-time home buyers make a minimum 3 percent downpayment and gives them reduced private mortgage insurance premiums and discounted mortgage rates.

HomeReady is the de facto low-down-payment conventional mortgage loan. The minimum credit score required is 620.

Learn more about the Fannie Mae HomeReady mortgage.

Home Possible: Good for Home Buyers With Boarder Income

Home Possible is a Freddie Mac affordable mortgage program for low-to-moderate-income households.

Home Possible is similar to the Fannie Mae HomeReady product: it allows a 3 percent down payment and offers reduced private mortgage insurance and discounted mortgage rates. However, the Freddie Mac version allows boarder income for qualifying purposes and enforces a minimum 660 credit score.

Learn more about the Freddie Mac Home Possible mortgage.

Conventional 97: Good for Home Buyers Making A Minimum Downpayment

The Conventional 97 mortgage, also known as the 97% LTV Standard, is the generic low-downpayment conventional mortgage.

Conventional 97 is available to first-time home buyers who purchase and plan to occupy their one-unit homes, including houses, condominiums, and townhomes, and who attend a homeownership education class.

Learn more about the Conventional 97 mortgage.

HomeStyle Renovation: Good for Home Buyers Making Major Repairs

The Fannie Mae Homestyle Mortgage is a mortgage that lets home buyers purchase a home and add the cost of repairs, improvements, or renovations to the loan’s beginning principal balance. HomeStyle mortgage rates are typically higher than other conventional mortgage rates.

Private Mortgage Insurance (PMI) for Conventional Mortgages

Private mortgage insurance (PMI) is to conventional mortgages what FHA mortgage insurance is to FHA mortgages: an insurance policy that pays mortgage lenders when a homeowner has a mortgage default from not making payments.

It’s customary for mortgage lenders to order private mortgage insurance on behalf of a home buyer. Policies are primarily identical in price and coverage, which is based on traits including down payment size, credit score, size of down payment, and mortgage program.

The typical private mortgage insurance fee is between 0.25 and 1.00 percent per year.

Private mortgage insurance rates are lower for home affordability mortgage programs like HomeReady and Home Possible than a standard conventional loan. Payments are also lower for fixed-rate mortgages compared to adjustable-rate mortgages.

Generally, a conventional mortgage requires private mortgage insurance until the homeowner’s equity reaches twenty percent. Therefore, for many first-time home buyers, PMI goes away quickly.

Most first-time buyers can cancel PMI in fewer than three years.

Here’s why: The value of a U.S. home goes up approximately 7 percent per year, and with every mortgage payment, a homeowner’s PITI reduces their mortgage balance. Therefore, a home buyer who starts with five percent down would need roughly 27 months to reach 80% loan-to-value.

It’s common for first-time home buyers to delay buying a home because they want to avoid paying private mortgage insurance.

This is one of the .

Common Questions �� Conventional Mortgages

What are this year’s conforming mortgage loan limits?

The FHFA set this year’s conforming mortgage loan limits at $806,500 for 1-unit homes, ranging up to $1,209,750 in high-cost areas. Search mortgage loan limits for every USPS address at /mortgage-loan-limits.

Can I still get a conventional mortgage if I don’t have a 20% down payment?

Yes, home buyers can use conventional mortgages with a down payment of less than twenty percent. Popular low-downpayment mortgages include HomeReady and Home Possible.

Can I get a conventional mortgage if my credit score is low?

Yes, conventional mortgages are available to home buyers with credit scores of 620 or higher. Home buyers with lower credit scores will generally be assigned higher mortgage rates. If your credit score is too low to get the mortgage rate you want, compare it to an FHA mortgage.

What happens if I need a loan larger than my local mortgage loan limit?

When a loan amount exceeds the FHFA’s local conforming limits, the loan becomes a non-conforming or jumbo loan, which may have different mortgage guidelines and interest rates.

The Big List Of First-Time Home Buyer Mistakes

Dan Green — Wed, 04 Aug 2021 12:15:00 +0000

First-time home buyers make mistakes. It’s unavoidable.

There is too much room for error to get it perfect. Home buyer education can prepare you for your first home-buying journey, but a homebuyer curriculum only gets you so far.

So, we’ve prepared two lists to help you be a better home buyer.

A list of tips for first-time buyers
A list of common first-time home buyer mistakes (this article!)

Consider bookmarking this page. It lists the most common mistakes first-time buyers make that delay or derail their American Dream of homeownership.

Let’s get going.

1. Don’t Assume You Need A 20 Percent Downpayment

You don’t need to make a 20 percent down payment to buy your first home.

According to the Consumer Financial Protection Bureau, the typical first-time home buyer makes a 6 percent down payment, and only a tiny percentage of first-time buyers put twenty percent down or more.

You can buy a home with a small down payment. There are more than a dozen home loans for first-time buyers that allow down payments of 5 percent or less.

Instead of making the largest down payment when you buy your first home, make the most sensible down payment instead.

2. Don’t Wait To Start Saving For A House

Ben Franklin famously said: “Money makes money. And the money that money makes, makes more money.”

It’s a quote about compounding interest, which is interest earned on prior interest earned. Compounding interest grows money quickly.

One effective way for buyers to build their savings faster is:

Open a high-yield interest savings account earmarked home buying
Make additional automatic deposits each month
Don’t make withdrawals until you buy your home

As the Philadelphian advises us: set your home savings goals early. The longer you save, the more money you make.

3. Don’t Forget To Save For Closing Costs

Buying a home requires fees and taxes. Even when you do a 100% mortgage, such as a USDA loan or VA loan – there are costs beyond the property’s purchase price.

Here’s a sample of closing costs you might see at your settlement:

Loan origination fees
Title insurance and settlement fees
Property taxes
Escrow fees
Transfer stamps
Survey fees

There are even costs when you use a no-closing-cost mortgage because move-in day costs money. Moving companies, home repairs, and household appliances aren’t free.

Have a plan to have some cash.

4. Don’t Buy More Home Than You Can Afford

Every successful home purchase starts with a mortgage pre-approva l.

A mortgage pre-approval is a dress rehearsal for your mortgage application. It tells you that your mortgage will be approved and how much home you can afford to buy.

How much home you can buy, however, is different from how much you should buy.

It’s a mistake to let the bank set your budget.

The better pre-approval approach is to determine how much you’re comfortable paying each month, then ask your lender to pre-approve you for that exact payment.

It’s impossible to go over budget when you start with your payment instead of your price.

5. Don’t Skip Checking Your Credit Report

Most home buyers have never seen their mortgage credit score, which is different from the free credit reports available from services like freecreditreport.com.

Mortgage credit reports are specific to the mortgage industry.

The good news is that mortgage pre-approvals include a credit score check and a complete borrowing history. As part of your pre-approval, ask your lender to see your credit report. Review it for errors and make improvements. You can also fix your credit score with just a little bit of work.

The best mortgage deals go to buyers with great credit.

6. Don’t Only Speak To One Mortgage Lender

, most first-time home buyers talk to one mortgage lender only – even as they admit comparison shopping will save them money.

So, why don’t consumers comparison shop? says it’s because of irrational consumer behaviors.

Thaler’s work says home buyers don’t comparison shop because consumers, in general:

Search too little for solutions
Are slow to switch from prior choices
Become confused by complex alternatives

To avoid this mistake, act rationally. Talk to multiple mortgage companies. Give multiple mortgage applications. Comparison shop to get your best deal.

7. Don’t Ignore First-Time Home Buyer Assistance Programs

First-time home buyers can access more than 800 federal, state, and municipal down payment assistance programs to help buy a home.

There are 5 main types of first-time home buyer assistance:

Down payment assistance
Closing cost assistance
Cash grants for buyers
Temporary interest rate reductions
Interest-free mortgages

Some first-time home buyer programs are saved for lower-income buyers and buyers from under-represented socio-economic groups. Others are first-come, first-served with no restrictions at all.

Don’t miss a chance for free homeowner money. Check with your local county website for housing assistance programs and visit the government’s to find other state and national programs.

8. Don’t Confuse Pre-Qualification and Pre-Approval

A mortgage pre-qualification is not a mortgage pre-approval. First-time buyers get burned by not knowing the difference.

Pre-qualification

A ballpark estimate of how much home you can buy based on a verbal review of your finances

Pre-approval

An everything-but-the-house mortgage approval based on verified finances

The difference between a pre-qualification and a pre-approval is that a pre-qualification has little value, and a pre-approval has high value.

Mortgage pre-approvals make a reliable framework for a purchase. Pre-approvals use income, assets, and credit score verifications to determine how much home a first-time buyer can buy, at what interest rate, and with what closing costs.

Pre-qualifications do none of those things.

9. Don’t Hire The First Real Estate Agent You Meet

Pay attention to who you hire to represent you.

A recent report from the asked home buyers what they want most from a real estate agent.

The top 3 answers showed buyers want real estate agents to help them:

Find the right home
Explain the contracts and paperwork
Negotiate great terms

Let’s also note: these are the three most important skills of all great agents – in real estate, sports, Hollywood, or anywhere else. First-time buyers shouldn’t just settle for the first agent they meet.

Great real estate agents understand your local market. They’ve toured many of the homes, submitted offers to purchase for other buyers, and negotiated sales contracts according to local custom.

When you work with a great real estate, you get a better house and pay a better price.

If you cannot tell the difference between a great agent and a bad one, ask a trusted friend for a referral.

10. Don’t Treat Your First Home As An Investment

Some of history’s greatest fortunes have come from owning property. But, as a first-time home buyer, avoid the approach of the real estate tycoon.

Instead, think practical.

When you’re a first-time home buyer, your new home will be your residence. You will live there and it will be the center of your life activities. So, buy a home that meets your household needs today.

Also, the typical homeowner moves . It’s unlikely this will be your forever home. You can expect to build equity and wealth in your home, but you may want that money to move up to your next home.

The happiest homeowners live in homes that meet their financial and emotional needs:

Their monthly payment is manageable and low-stress
The commute to work is brief and without traffic
Their neighborhood is a community with friendly residents
The local school system is highly rated and well-funded
There are parks nearby for running, biking, and outdoor activity

Remember that a good home will appreciate. A great home you will appreciate.

11. Don’t Skip The Neighborhood Tour

Your neighborhood shapes your homeowner experience.

When you purchase a home, you inherit its property line, neighbors, and community. The best and happiest home buyers study up on their prospective homes before they write a contract.

Recognize that it’s hard to meet neighbors during open houses and home tours, so try these other home-buying reconnaissance tactics.

Drive through during the weekend and talk to people
Drive through on a weekday night and talk to people
Test-drive your new work commute on a weekday morning
Look for community events, including Meet Your Neighbors and block parties
Visit the closest grocery store on a Sunday afternoon

You’ll spend a lot of time in your new neighborhood. Get to know it ahead of time.

12. Don’t Overshare at the Open House

Sometimes, it’s best to play it quiet – especially at the open house.

Open houses are events where for-sale properties are opened for public touring. Home buyers can use open houses to walk through a home and get a feel for how its space works.

The seller’s agent is usually on-site to answer questions at an open house. The smartest home buyers will ask questions while offering up little information about themselves:

What do you know about this neighborhood?
Why is the seller moving?
What is the seller’s timeline?
Are the home appliances up-to-date?
Have there been significant repairs to the home?

Every piece of personal information shared is an opportunity to weaken your negotiation.

When you fawn over the home’s incredible curb appeal, for example, or its status as a move-in ready home, it may signal the seller that you’re willing to overpay. Similarly, when you talk about buying a home with bad credit, the seller may think you’re unqualified.

You have twice as many ears as mouths. When you go to an open house, remember that proportion. Listen twice as much as you speak.

13. Don’t Skip The Home Inspection

A good inspection will save you tens of thousands of dollars in home repairs, systems breakdowns, and insurance deductibles, so don’t skip it.

A home inspection examines a home, its systems, and appliances performed by a licensed professional. Home inspections cost $300-800 to commission, and require at least one minor or major repair.

Order a home inspection within seven days of going into contract. Select an experienced home inspector for the type of home you’re buying, one who understands your home’s systems, including heating, cooling, plumbing, and electrical.

During the home inspection, an inspector will share maintenance tips and home-keeping advice specific to your home. They may also share that your home requires a new roof or its foundation has creaks or leaks.

The inspector’s findings can be the basis for re-negotiating the contract for repairs, discounts, or cancellations. The money spent is worth it.

14. Don’t Forget To Check For USDA-Eligible Homes

Before committing to a down payment, check your eligibility for the 100% USDA mortgage.

The USDA mortgage is a no-money-down loan backed by the U.S. Department of Agriculture (USDA). The loan’s official name is the Section 502 mortgage, named for the section of the , which outlines the program’s rules and regulations.

The USDA loan is for modest buyers of modest homes in non-urban parts of the nation. USDA mortgages tend to be less expensive than other types of mortgages, and when mortgage rates drop, USDA loans can be refinanced inexpensively.

The main benefits of a USDA mortgage include:

No down payment is required to buy a home
Lower-than-average mortgage rates, based on HMDA data
Flexible standards for buyers with less-than-perfect credit

USDA mortgages are for primary residences. Loans are available with the 30-year fixed-rate option only.

Click here to search the USDA eligibility map.

15. Don’t Skimp On Your Cash Emergency Fund

Life happens unexpectedly, and first-time home buyers without an emergency fund are at higher risk of foreclosure.

Foreclosure is the legal process of a lender repossessing a home after non-payment and then selling it to pay off its mortgage. According to , foreclosures affect approximately 30,000 homeowners annually.

The three most common reasons for foreclosure are:

Death of a household wage-earner
Illness preventing a wage-earner from working and earning income
Divorce, which usually lowers the wages earned within a household

Households with emergency funds often keep their homes in a crisis. Households without emergency funds often don’t.

Before you save for a down payment, save for an emergency fund. Have three months of mortgage payments in your account, at minimum. Six or twelve months is even better.

Life rarely moves in straight lines. Emergency funds protect your life.

16. Don’t Ignore The Rules Of The HOA

When buying in a homeowners association (HOA), you lose some of your household freedoms.

Homeowners associations are legal entities that govern planned community, condominium, and townhome developments. HOAs enforce rules and regulations for properties and common areas.

The stated goal of HOAs is to manage shared amenities, support property values, and improve the quality of life for its residents. Americans live in HOA communities, and membership is mandatory.

Rules vary by community and often include the following:

Make regular HOA membership payments, known as HOA dues
Maintain the exterior and curb appeal of your home
Limit the number of automobiles parked at your home
Refrain from displaying signs on your property
Maintain regular noise levels

Violating HOA rules can result in fines, penalties, and, in extreme cases, legal action.

First-time buyers should review an association’s governing structure before purchasing an HOA-governed property. Ensure the rules, fees, and restrictions align with your lifestyle and expectations.

Questions Readers Ask �� Buying Their First Home

I’m ready to start looking for houses. What do I do first?

The first step of every successful home search is getting mortgage pre-approved. A mortgage pre-approval tells you how much home you can purchase and what to expect for your payment. Getting pre-approved also provides you with a Verified Approval Letter, which shows home sellers that you’re a serious buyer.

Do first-time home buyers have to make a down payment?

No, not all first-time home buyers have to make a down payment. Multiple mortgage programs, including the VA, USDA, and Doctor Loans for Physicians, allow no money down for eligible buyers.

Government assistance programs for first-time buyers, such as down payment assistance, forgivable loans, and cash grants for first-time buyers, can help make loans 100% financed.

How much down payment does the typical first-time buyer make?

According to the National Association of REALTORS®, the typical first-time home buyer makes . The median down payment for all home buyers is twelve percent.

How do I prove that I’m a first-time home buyer?

There are several answers to “What is a first-time home buyer?” The most common interpretation used by lenders is that a first-time buyer is any person who has not owned the home they’ve lived in for the last 36 months.

Most first-time home buyer programs use the 36-month definition.

FHFA First-Time Home Buyer Mortgage Rate Discount: Explained

Dan Green — Thu, 10 Nov 2022 00:19:40 +0000

The Federal Housing Finance Agency (FHFA) is continuing its automatic mortgage rate discount in 2025 for eligible first-time buyers who finance their home with a conventional mortgage.

This post covers the details of the FHFA First-Time Home Buyer Mortgage Rate Discount program, who’s eligible, and other available mortgage discounts for first-time buyers.

How the FHFA Mortgage Rate Discount Works

The FHFA Mortgage Rate Discount waives (LLPAs) on conventional mortgages made to first-time buyers.

LLPAs are small interest rate adjustments based on a buyer’s credit profile. Along with broader factors like inflation rates and U.S. housing trends, LLPAs explain why different buyers may receive different mortgage rate quotes from the same lenders.

Eight key factors can affect conventional mortgage rates through LLPAs:

The home buyer’s credit score
The home buyer’s loan-to-value
Whether the buyer uses an adjustable-rate mortgage
Whether the buyer’s home is a primary residence
Whether the buyer’s home is a multi-unit property
Whether the buyer’s home is a condominium
Whether the buyer’s home is a manufactured home
Whether the buyer uses a subordinate lien

With the FHFA First-Time Home Buyer Mortgage Rate Discount, there are no LLPA micro-adjustments. This can result in mortgage rates up to 1.75 percentage points lower for eligible buyers.

FHFA First-Time Home Buyer Mortgage Rate Discount

Credit Score	Down Payment	Loan Type	Mortgage Rate Discount
620	3%	Fixed	1.75%
640	3%	Fixed	1.50%
660	3%	Fixed	1.25%
680	3%	Fixed	0.50%
700	3%	Fixed	0.50%
720	3%	Fixed	0.25%
740	3%	Fixed	0.25%
760	3%	Fixed	0.25%

Assumptions: 50 bps loan-level pricing adjustment ~ 0.25% mortgage rate
Source: Fannie Mae LLPA Matrix

Who Qualifies for the FHFA First-Time Home Buyer Mortgage Rate Discount

Eligible buyers automatically receive the FHFA First-Time Home Buyer Mortgage Rate Discount. There is no separate application or additional qualification process.

Here are the five key qualifying criteria:

You must be a first-time buyer

The definition of a first-time buyer is any person who has not owned their primary home in the past three years. Exceptions may apply to displaced homemakers or single parents if their previous residence was jointly owned with a spouse, and they owned no other properties.

Your home must be your primary residence

The FHFA mortgage rate discount applies only to primary residences, meaning the buyer must live in the home more than 180 days per year and use its address as their official residence. Vacation homes, and short- and long-term rentals are not eligible.

You must move in within 60 days of closing

Home buyers must occupy the home within 60 days of closing. If repairs are needed before moving in, the home must still be habitable within this timeframe. Exceptions are made for deployed active-duty military members.

You must be a low- or middle-income wage earner

The FHFA restricts its discount to low- and middle-income earners. To qualify, the buyer’s income must be below the area’s , with some exceptions in high-cost areas.

You must use a conventional loan

The FHFA governs Fannie Mae and Freddie Mac, so the discount applies to conventional mortgages. It is unavailable for buyers using FHA, VA, or USDA loans.

Common Questions �� the FHFA First-Time Home Buyer Mortgage Rate Discount

How do I apply for the FHFA mortgage rate discount?

There is no application process. Eligible first-time buyers automatically receive the FHFA mortgage rate discount when using a conventional mortgage.

Am I eligible as a first-time buyer if my spouse owned a home previously?

The FHFA’s definition of a first-time buyer requires that neither applicant on the mortgage have owned a home within the past three years. If a spouse is included on the mortgage and has owned a home recently, the discount cannot be applied.

Am I eligible for the program if I’m buying a mobile home?

Yes, buyers of mobile homes can still qualify for the FHFA First-Time Home Buyer Mortgage Rate Discount.

Does the discount apply if I’m currently closing on a home?

Yes, the discount applies to loans that close on or after December 1, 2022. Since today is May 9, 2025, the discount applies to your closing if it occurs on or after that date.

When will the FHFA mortgage rate discount program become law?

The FHFA is a government agency and does not require Congressional approval to enact its programs. As such, the discount program has been in effect since December 1, 2022.

Does the FHFA mortgage rate discount remove guarantee fees?

No, the FHFA discount does not eliminate guarantee fees (g-fees), which cover administrative costs associated with servicing the loan.

16 First-Time Home Buyer Grants and Programs

Dan Green — Tue, 22 Feb 2022 18:30:00 +0000

This article tracks housing and first-time home buyer bills in Congress. None of the programs featured are passed into law. This article is for informative and planning purposes only.

Take advantage of today’s mortgage rates without making a 20 percent down payment.

Along with low-down payment mortgages and no-down payment options, such as the USDA mortgage and VA mortgage, there are 16 first-time home buyer grants and programs that make buying your first home more affordable and accessible.

What is a First-Time Home Buyer Program?

First-time home buyer programs are mortgage loans and benefits that help renters achieve their American Dream of homeownership.

First-time buyer programs are broadly grouped into 3 categories:

Home affordability mortgages from a mortgage lender
Cash grants and incentives from a public or private organization
Stimulus programs from Congress or a government agency

First-time buyer programs expand homeownership opportunities to new groups of people. They’re particularly beneficial to buyers for whom making a big down payment or paying real estate fees is cost-prohibitive.

Eligibility may be based on job title, household income, or status as a first-time buyer. Programs are typically inclusive, lenient, and offered at low mortgage rates.

First-Time Home Buyer Programs: Affordable Mortgages

An affordable mortgage is a government-backed mortgage with relaxed down payment requirements, reduced mortgage insurance fees, or discounts for qualified buyers.

Our analysis of mortgage statistics shows more than 1 million first-time home buyers use affordable mortgages each year. Here are the programs first-time buyers use.

1. HomeReady: Low Down Payment Mortgage

HomeReady is a 3-percent down payment mortgage that offers reduced mortgage rates and lower loan costs for low- and moderate-income home buyers.

HomeReady is a modified conventional mortgage, backed by Fannie Mae. It requires a minimum 620 credit score and allows a debt-to-income ratio of up to 50%. Buyers can use it to finance Accessory Dwelling Units and may use Cannabis industry income as part of their application.

Home buyers using HomeReady to purchase a property in default can receive an extra $500 closing cost credit and up to 3 percent toward their mortgage closing costs via Fannie Mae’s HomePath foreclosure sale program.

2. Home Possible: Low Down Payment Mortgage

Home Possible is a 3-percent down payment mortgage similar to HomeReady. It offers low- and moderate-income home buyers reduced mortgage rates and loan fees and is available as a fixed-rate or adjustable-rate loan.

Home Possible requires eligible buyers to have a 660 credit score while allowing up to 50% DTI. Home Possible is based on a Freddie Mac conventional mortgage.

Compare HomeReady and HomePossible side-by-side.

3. Conventional 97 / Standard 97 LTV: Low Down Payment Mortgage

Conventional 97 is a 3-percent down conventional mortgage for home buyers who are not low- and moderate-income earners. The program is sometimes called the Standard 97 LTV, which is shorthand for a “standard conventional 97% loan-to-value mortgage”.

Program eligibility requires a 620 credit score, a 50% debt-to-income ratio, and buyers must meet the definition of a first-time home buyer.

The Conventional 97 is available as a fixed-rate mortgage for 1-unit properties only, which includes single-family homes, eligible condos, and townhomes.

4. FHA Mortgage: Low Down Payment Mortgage

The FHA mortgage is the original affordable housing mortgage loan.

Created as part of the in 1934, the FHA loan is an inclusive 3.5% down payment mortgage backed by the Federal Housing Administration (FHA). FHA mortgage guidelines are lenient with credit scores, income sources, and credit history.

The FHA mortgage is popular with the “house hacker” crowd for its comparatively low mortgage rates for multi-unit homes.

Home buyers using an FHA-backed mortgage in 2025 are limited to loan sizes of $498,257 for 1-unit homes in most parts of the country, and $1,149,825 in high-cost areas.

Find your local FHA mortgage loan limit here.

5. USDA Mortgage: No Down Payment Mortgage

The USDA mortgage is an affordable housing mortgage program for buyers in non-urban communities. According to the USDA eligibility map, 91% of the United States land mass qualifies as non-urban.

The U.S. Department of Agriculture backs USDA mortgages.

USDA loans do not require a down payment, and buyers using the USDA mortgage average the smallest down payment of all government-backed loan types.

Homebuyer.com’s collection of mortgage statistics shows the typical USDA mortgage is made at a loan-to-value of 97.76 percent, with mortgage rates averaging 24.7 basis points below comparable conventional home loans.

6. VA Mortgage: No Down Payment Mortgage

The VA mortgage is a home affordability loan program for active-duty military members, veterans of the armed services, and surviving spouses. The Department of Veterans Affairs backs the VA mortgage, available to buyers as fixed- or adjustable-rate mortgages in all 50 states.

VA mortgages require a minimum 580 credit score and never charge mortgage insurance. Eligible military buyers can use VA loans to purchase any residential property as a primary residence except for non-warrantable condos and co-ops.

7. The FHFA First-Time Home Buyer Mortgage Rate Discount: Discounted Rates

Since early-2023, the FHFA First-Time Home Buyer Mortgage Rate Discount is applied automatically to all mortgages for buyers meeting three mortgage criteria:

Meets the definition of a first-time home buyer
Uses a conventional mortgage of any kind
Earns a low- to moderate household income

Eligible first-time buyers get a mortgage rate discount of up to 1.75 percentage points off today’s mortgage rates, increasing a buyer’s home purchasing power by approximately 19 percent. Mortgage lenders apply the discount automatically, which varies by credit score, down payment size, property type, and loan program.

FHFA First-Time Home Buyer Mortgage Rate Discount

Credit Score	Down Payment	Loan Type	Mortgage Rate Discount
620	3%	Fixed	1.75%
640	3%	Fixed	1.50%
660	3%	Fixed	1.25%
680	3%	Fixed	0.50%
700	3%	Fixed	0.50%
720	3%	Fixed	0.25%
740	3%	Fixed	0.25%
760	3%	Fixed	0.25%

Assumptions: A -50 bps loan-level pricing adjustment yields an approximate 0.25% mortgage rate reduction
Source: Fannie Mae LLPA Matrix, Homebuyer.com

First-Time Home Buyer Programs: Cash Grants & Incentives

Cash grants are non-repayable gifts to first-time home buyers to help purchase their first home.

Mortgage lenders do not issue cash grants.

Home buyers should apply for cash grants with government and local organizations directly, which do a public good, show cash grants increase homeownership rates by 34 percent.

Here are some common first-time home buyer cash grants and buyer incentives available to home buyers today:

1. The National Homebuyers Fund: Forgivable Cash Grant

The National Homebuyers Fund is a non-profit public benefit corporation that sponsors home buyers with up to 5 percent of a home’s purchase price. In exchange for the organization’s cash grant, home buyers agree to live in their home as a primary residence for at least five years.

The National Homebuyers Fund cash grant is typically used together with a standard mortgage loan, such as a conventional, FHA, USDA, or VA home loan, as a five percent down payment. Buyers cannot apply directly for the National Homebuyers Fund grant – only a mortgage lender can do it. For a list of participating lenders, call (916) 444-2615.

2. Discounted Homes from HUD: Discounted Real Estate

The Good Neighbor Next Door Program (GNND) is a U.S. Department of Housing and Urban Development (HUD) program that sells repossessed homes to first-time home buyers at half-price.

Good Neighbor Next Door is available to teachers, firefighters, law enforcement officials, and emergency medical technicians who want to live in the same community where they work.

Home buyers who want to buy a Good Neighbor Next Door property must search for homes on the HUD website, and apply for their mortgage through a HUD-approved lender.

3. Closing Cost Assistance: Cash Grants For Closing Costs

Closing cost assistance programs are incentive programs that pay up to 100 percent of a first-time home buyer’s closing costs, including title insurance fees, real estate transfer taxes, and mortgage discount points.

Closing cost assistance is handled outside of the mortgage approval sequence.

Home buyers searching for closing cost assistance programs can search the National Council of State Housing Agencies’ website at https://www.ncsha.org/about-us/about-hfas/ or perform a similar search through local homebuying programs at .

Eligibility criteria may be out-of-date and program funding may be expired, so check with each local agency before applying for a program.

4. Down Payment Assistance Programs (DPA): Cash Grants & Credits

Down payment assistance is a first-come, first-served cash grant to help make homes affordable.

Cash grants can range from $500 to $50,000 which buyers can apply to closing costs, discount points, and down payments on a home.

The most common form of down payment assistance is seller concessions, which is when a home seller pays some or all of a home buyer’s settlement fees. Seller concessions are negotiated by a buyer’s agent and included in a purchase offer agreement.

Other forms of down payment assistance include federal and local tax credits, which are automatically applied by the IRS, and forgivable grants for buying a home and living in it for a predetermined number of years, usually five.

5. Down Payment Loans: Discounted Mortgages

Down payment loans are loans made by non-profit and community organizations at ultra-low rates, used for a buyer’s down payment percentage. Interest rates for a down payment loan are often in the one-percent range and amortized over 30 years.

A $25,000 down payment loan at 1% would cost a home buyer $80 per month.

Some mortgage program guidelines disallow down payment loans, so check with your lender before applying. Your lender may have other low-down payment options available for you.

6. Deferred Payments: Discounted Mortgages

A deferred mortgage is a modified mortgage loan that requires no payments whatsoever so long as you live in your home. A deferred mortgage only comes due when you sell your home or refinance it.

Mortgage banks and brokers don’t issue mortgages with deferred mortgage payments. The best place to find a deferred mortgage is with a municipal government or local foundation, which may issue deferred mortgage loans in amounts up to $25,000.

Deferred mortgages are often limited to low- to moderate-income first-time buyers with a decent credit history and record of on-time payments.

First-Time Home Buyer Programs: Congress Stimulus Programs

Congress regularly introduces first-time home buyer bills to help renters pursue of the American Dream of homeownership. Some bills pass into law. Others do not.

Here are several first-time home buyer programs in progress with the current Congress.

1. The $15,000 First-Time Homebuyer Act of 2024

The First-Time Homebuyer Act of 2024 gives eligible first-time home buyers a federal tax credit of up to $15,000 that can used at closing to make a down payment and pay closing costs, or be paid by the Treasury as a tax refund.

The First-Time Homebuyer Act of 2024 is a bi-cameral bill. It’s sometimes called the Biden First-Time Buyer Tax Credit because it was announced as part of the administration’s push for affordable housing and modeled after the Obama First-Time Buyer Tax Credit, which created more than 2.6 million new homeowners.

2. The $25,000 Downpayment Toward Equity

The Downpayment Toward Equity Act is a cash grant that awards up to $20,000 to first-generation, first-time home buyers, plus an additional $5,000 to buyers from socially or economically disadvantaged backgrounds.

The bill’s language allows home buyers to use their $25,000 cash grant to make a down payment, pay closing costs or real estate taxes, or access lower mortgage rates.

3. The DASH Act

The DASH Act is a comprehensive housing bill, similar to the Biden Tax Credit bill, giving eligible first-time buyers a $15,000 federal income tax credit.

To qualify for the DASH Act as the bill’s written, home buyers must be low- to moderate-income earners, meet specific residency requirements, and purchase a home whose price is no more than 10 percent above the area’s conforming mortgage loan limit.

4. The HELPER Act

The HELPER Act is a mortgage bill allowing teachers, firefighters, and law enforcement officers to obtain mortgages without a down payment or monthly mortgage insurance.

HELPER stands for “Homes for Every Local Protector, Educator, and Responder.”

The HELPER Act is a bipartisan, bicameral bill with strong support and a long list of co-sponsors. The bill is piggybacked on the FHA mortgage program and could pass into law at any time.

5. The $10,000 Mortgage Credit Relief Program

The $10,000 Mortgage Credit Relief program is a proposal President Biden floated during his 2024 State of the Union address. The program would give eligible first-time home buyers two annual tax credits of $5,000 to offset the costs of carrying a higher mortgage.

Common Questions �� First-Time Home Buyer Grants

What is a first-time home buyer?

A first-time home buyer is a person who has not owned their main residence in the 36 months prior. A person who owned a home previously and has not owned a home in 3 years is a first-time home buyer for the second time.

How do you buy a house if you have no money?

Home buyers with no money for a down payment can use housing grants, down payment assistance, and forgivable mortgages to purchase a home with no money down. Some home buyers are eligible for 100% mortgages via the USDA and VA loan programs.

What is an NHF grant?

An NHF grant is a housing grant for first-time home buyers awarded by the National Homebuyers Fund. NHF awards housing grants for up to 5 percent of a home’s purchase price.

Which loan is best for first-time home buyers?

Most first-time home buyers use a conventional 30-year fixed-rate mortgage to purchase their first home, but that doesn’t make it the “best loan” for first-time buyers. Mortgages are not one-size-fits-all. Let a mortgage company pre-approve your mortgage and give you advice.

Are first-time home buyer programs for lower-income buyers only?

No, most first-time home buyer programs were created to promote homeownership among Americans, and healthy neighborhoods and communities. Some programs target lower-income households, but many serve buyers with all incomes.

What Is Annual Percentage Rate (APR)?

Dan Green — Thu, 26 Oct 2023 00:53:36 +0000

Annual Percentage Rate (APR) is a calculation that represents the complete cost of a mortgage held to its full term, expressed as a percentage.

Annual Percentage Rate (APR): A Longer Definition

Annual Percentage Rate (APR) is a government calculation based on the total payments a home buyer would make over time if the mortgage is held to its full term. It includes mortgage interest, closing costs, insurance premiums, and other loan-related expenses.

The helps home buyers compare two or more mortgages, but it should not be the only factor in making a decision.

For example, if a first-time home buyer is considering a 30-year fixed-rate FHA mortgage and has a Loan Estimate from two or more lenders, the mortgage with the lower APR may seem like the better offer. However, it is important to consider all aspects of the mortgage, such as upfront costs and how long the buyer intends to keep the loan.

There are cases when home buyers should not rely solely on APR, such as when the buyer plans to sell the home, pay off the mortgage, or refinance within the loan’s initial term, or when using an adjustable-rate mortgage, or when private mortgage insurance is required.

In these situations, the APR calculation may not reflect the actual cost of the mortgage over time, since it is based on assumptions that might not hold true in the future.

Common Questions �� Annual Percentage Rate (APR)

How does APR differ from the mortgage interest rate?

The mortgage interest rate is the cost of borrowing the loan’s principal amount. The APR, on the other hand, reflects the interest rate plus additional fees and loan costs, offering a more complete picture of the loan’s cost. However, remember that it is not the only measure of affordability.

Can the APR change after I’ve secured a mortgage?

For fixed-rate mortgages, the APR remains constant unless mortgage insurance is required, which can change based on the loan’s principal and equity. For adjustable-rate mortgages, the APR changes when the interest rate does.

Is a mortgage with a lower APR always a better option?

A lower APR might suggest better terms, but not always. For example, a mortgage with several discount points may show a lower APR but higher closing costs, which may not fit your budget or needs. A mortgage with a higher APR but lower upfront costs could be better depending on your financial situation and how long you plan to keep the loan.

What kinds of fees are typically included in the APR?

Mortgage APR calculations include loan origination fees, discount points, mortgage insurance premiums, and closing costs. It does not include attorney or title fees, which would apply even if the buyer paid in cash.

How can I use APR when comparing mortgage offers?

To compare APRs effectively, ensure you’re comparing similar loans, such as 30-year fixed-rate mortgages, and verify that the mortgage insurance payment schedules are the same if applicable. APR is not useful for comparing adjustable-rate mortgages or different types of loans, like conventional versus FHA.