Mortgage Loan FAQ

Getting Started

What’s the first step to getting a mortgage?

Talk to a lender and get pre-approved before you start touring homes. Pre-approval tells you the price range you actually qualify for, makes your offer credible to Houston sellers, and keeps you from falling for a home that’s out of reach. I’m glad to connect you with lenders I trust — reach them through the Houston Prime Realty app or just ask me.

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

Pre-qualification is a quick estimate based on information you tell the lender — nothing is verified. Pre-approval goes further: the lender pulls your credit and verifies your income and the funds you have for a down payment and closing. Pre-approval carries real weight, and most Houston sellers won’t seriously consider a financed offer without one.

How much home can I afford?

A common rule of thumb is that your total housing payment stays around 28% of your gross monthly income, with all your debts combined staying under about 43% — but lenders look at the full picture: income, debts, credit, down payment, and the loan type. The most accurate answer comes from a pre-approval. In the Houston area, remember to factor in property taxes and insurance, which run higher here than in many states.

How much do I need for a down payment?

It depends on the loan:

• VA and USDA loans: 0% down for qualified buyers
• FHA loans: 3.5% down with a 580+ credit score
• Conventional loans: as little as 3%–5%; 20% to avoid PMI
• Down payment assistance: can cover part or all of it for eligible buyers

You do not need 20% down to buy a home — that’s one of the most common myths I hear.

Do I have to be debt-free to qualify?

No. Lenders care about your debt-to-income ratio (DTI) — how your monthly debt payments compare to your income — not whether you carry any debt at all. Many buyers qualify with car loans, student loans, and credit cards. If your DTI is high, paying down a balance or two before applying can help.

Loan Types

What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration, designed for buyers with limited savings or a thinner credit history. It allows 3.5% down with a credit score of 580 or higher (sometimes 500 with 10% down). The trade-off is mortgage insurance — an upfront premium of 1.75% plus an annual premium (commonly about 0.55%) that’s generally paid for the life of the loan on low-down-payment FHA mortgages. For 2026, the FHA single-family loan limit in Harris County is $541,287. You can learn more from HUD.

What is a VA loan?

A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, active-duty service members, and some surviving spouses. It offers 0% down, no monthly mortgage insurance, and competitive rates. There’s a one-time VA funding fee — 2.15% of the loan for most first-time uses with no down payment — but it’s waived entirely for veterans receiving VA disability compensation. Check your eligibility through the VA home loan program.

What is a conventional loan?

A conventional loan is any mortgage that isn’t government-insured. It’s the most common loan for buyers with solid credit. Down payments start as low as 3% for some first-time-buyer programs and 5% for most buyers; put 20% down and you avoid private mortgage insurance (PMI). For 2026, the conforming loan limit in Harris County is $832,750.

What is a USDA loan?

A USDA loan is a zero-down mortgage backed by the U.S. Department of Agriculture for buyers in eligible rural and outer-suburban areas. More of the Houston metro’s edges qualify than people expect — including parts of Waller, Montgomery, and Brazoria counties. There are household income limits and the home must sit inside a USDA-eligible boundary. If you’re open to the outskirts, it’s worth checking the map.

What is a jumbo loan?

A jumbo loan is any mortgage above the conforming limit — $832,750 in Harris County for 2026. Because lenders can’t sell these loans to Fannie Mae or Freddie Mac, they carry stricter requirements: a higher credit score, a larger down payment, and more cash reserves. Jumbo loans are common in Houston’s higher-priced neighborhoods and the move-up market.

What is a hard money loan?

A hard money loan is a short-term, asset-based loan secured mainly by the property itself rather than the borrower’s credit and income. Rates are higher and terms are shorter, so they’re used for specific situations — investors, flippers, or properties that don’t fit standard guidelines — not typical owner-occupied purchases.

What’s the difference between a fixed-rate and an adjustable-rate mortgage?

A fixed-rate mortgage keeps the same interest rate for the entire term, so your principal-and-interest payment never changes — the most predictable option, and what most buyers choose. An adjustable-rate mortgage (ARM) starts with a lower fixed rate for an introductory period (often 5, 7, or 10 years), then adjusts periodically based on market rates. An ARM can make sense if you expect to move or refinance before it adjusts, but it carries more risk if rates rise.

Which loan type is right for me?

It comes down to your credit, your savings, your service history, and where you’re buying. A veteran with no down payment leans VA; a first-time buyer with limited savings often looks at FHA or a down payment assistance program; a buyer with strong credit and 20% down usually does best with conventional. I’ll help you weigh the options and connect you with a lender who can model the real numbers side by side.

Down Payment, Costs & Insurance

What are closing costs and how much are they?

Closing costs are the fees to finalize your loan and purchase, paid at the closing table. For buyers in Texas they typically total 2%–5% of the purchase price and include:

• Lender fees: origination, underwriting, and related charges
• Title insurance and title company fees
• Appraisal: roughly $500–$700
• Survey: roughly $400–$600
• Prepaid property taxes, insurance, and escrow setup

In many negotiations, the seller contributes toward the buyer’s closing costs as part of the offer — something I’ll help you negotiate.

What is earnest money?

Earnest money is a good-faith deposit you make when your offer is accepted, showing the seller you’re serious. In Texas it’s held in escrow by the title company and applied toward your funds at closing. The amount is negotiable — often around 1% of the price. It’s separate from your down payment, though it counts toward the total cash you bring to the deal.

What is PMI (private mortgage insurance)?

PMI is insurance that protects the lender if you default, required on most conventional loans when you put down less than 20%. It’s added to your monthly payment. The good news: PMI isn’t permanent — you can request cancellation once your loan balance reaches 80% of the home’s original value, and the lender must remove it automatically at 78%, per the Consumer Financial Protection Bureau.

What is MIP (FHA mortgage insurance)?

MIP is the FHA’s version of mortgage insurance. It has two parts: an upfront premium of 1.75% of the loan (usually rolled into the balance) and an annual premium — commonly about 0.55% — split across your monthly payments. Unlike conventional PMI, MIP on a low-down-payment FHA loan is generally paid for the life of the loan. Many buyers who start with FHA later refinance into a conventional loan to drop the insurance once they have enough equity.

Can I get rid of mortgage insurance?

On a conventional loan, yes — PMI cancels automatically at 78% loan-to-value, or you can request it at 80%. On an FHA loan, MIP usually stays for the life of the loan, so the common path is to refinance into a conventional loan once you’ve built roughly 20% equity and your credit supports it. Rising Houston home values have helped a lot of buyers reach that point faster than expected.

What is an escrow account?

An escrow (or impound) account is set up by your lender to collect 1/12 of your annual property taxes and homeowner’s insurance with each monthly payment, then pay those bills for you when they come due. Escrow is required on most loans with less than 20% down. It’s why your monthly payment is often larger than just principal and interest — and why Houston-area payments feel higher, since Texas property taxes are above the national average.

Rates & Qualifying

What credit score do I need to buy a home?

FHA loans can work with scores as low as 580 (sometimes 500 with a larger down payment). Conventional loans generally want 620 or higher, and the lowest rates go to scores around 740 and up. A lower score doesn’t mean “no” — it usually means a different loan program or a few months of preparation. A good lender can give you a specific plan to raise your score.

What is debt-to-income ratio (DTI)?

DTI compares your total monthly debt payments — the new mortgage plus car loans, student loans, credit-card minimums, and similar — to your gross monthly income, expressed as a percentage. Many loan programs look for a DTI at or below about 43%, though some allow higher with strong compensating factors. Lowering your DTI before applying, by paying down a balance or holding off on a new car loan, can improve what you qualify for.

What is a rate lock?

A rate lock is your lender’s guarantee to hold a specific interest rate for a set period — often 30 to 60 days — while your loan is processed, protecting you if rates rise before closing. If rates fall significantly during the lock, ask your lender about a float-down option. Your lender will advise on the best time to lock based on your timeline.

What are discount points?

Discount points are an optional upfront fee you can pay to “buy down” your interest rate. One point costs 1% of the loan amount and typically lowers your rate by a fraction of a percent. Points can make sense if you plan to stay in the home long enough to recoup the cost through lower payments — your lender can run the break-even math.

What actually affects my mortgage rate?

Your rate is shaped by your credit score, down payment size, loan type and term, the property type, your DTI, and broader market conditions — plus whether you buy discount points. Two buyers shopping on the same day can get different rates based on these factors, which is exactly why it pays to compare lenders.

Does shopping multiple lenders hurt my credit?

Not in any meaningful way. Credit-scoring models treat multiple mortgage inquiries within a short window — typically 14 to 45 days — as a single inquiry, precisely so you can shop for the best rate. Comparing two or three lenders is smart and can save you real money over the life of the loan.

Texas & Houston Programs

Are there first-time home buyer programs in Texas?

Yes — several. The Texas Homebuyer Program (TDHCA) offers My First Texas Home (for first-time buyers) and My Choice Texas Home (open to repeat buyers), both pairing a competitive 30-year loan with down payment assistance. TSAHC runs Homes for Texas Heroes — for teachers, police, firefighters, EMS, corrections officers, and veterans — and Home Sweet Texas for low-to-moderate-income buyers. Most require a homebuyer education course and have income limits.

What down payment assistance is available in Houston?

Buyers purchasing a home inside Houston city limits may qualify for the City of Houston Homebuyer Assistance Program, which offers up to $50,000 in assistance based on financial need. It’s structured as a no-interest, forgivable loan — live in the home for five years and it’s forgiven — and it works alongside FHA, VA, USDA, and conventional loans. You generally must be a first-time buyer (or not have owned in three years) with household income at or below 80% of the area median. The statewide TDHCA and TSAHC programs above are available across Cypress, Katy, and Bryan–College Station too.

How do Texas property taxes affect my mortgage payment?

Texas has no state income tax, which keeps property tax rates relatively high — combined rates in Greater Houston typically run between 2% and 3.5% of appraised value. Because most lenders escrow taxes into your monthly payment, those taxes have a real impact on what you pay each month. When comparing homes, always look at the total tax rate (county + ISD + city + any special districts), not just the headline number.

What is a MUD, and how does it affect my payment?

A MUD — Municipal Utility District — is a special district that funds water, sewer, and drainage in many newer Cypress, Katy, and outlying Houston subdivisions, and it levies its own property tax on top of the county and school district. That MUD tax raises your total tax rate, which raises your escrowed monthly payment. It’s not a reason to avoid a neighborhood, but you’ll want the full tax picture before you write an offer. (See the Buyer FAQ for more on MUDs, ISDs, and HOAs.)

Appraisal, Underwriting & Closing

What is an appraisal, and what happens if it comes in low?

An appraisal is an independent estimate of the home’s value, ordered by your lender to confirm the price supports the loan. If it comes in below the contract price, you have options: renegotiate the price with the seller, cover the gap with extra cash, or — depending on your contract — walk away. In the Houston market I’ll help you build an appraisal strategy into your offer from the start.

What is underwriting?

Underwriting is the lender’s deep review of your loan before final approval. The underwriter verifies your income, employment, assets, credit, and the property itself, then issues conditions to clear before you get the “clear to close.” The smoothest underwriting happens when you avoid major financial changes — new debt, large deposits, or job changes — while your loan is in process.

What’s the difference between a Loan Estimate and a Closing Disclosure?

A Loan Estimate is a standardized, three-page document your lender provides within three business days of your application, laying out your projected rate, monthly payment, and closing costs so you can compare lenders apples-to-apples. A Closing Disclosure is the final version of those numbers, provided at least three business days before closing. Compare the two side by side — the figures should line up closely.

How long does it take to close on a mortgage?

For a financed purchase in the Houston area, expect about 30 to 45 days from accepted offer to closing. Cash purchases can close in as little as 10 to 21 days. Staying responsive to your lender’s document requests is the single biggest thing you can do to keep the timeline on track.

What can delay or derail my loan before closing?

The usual culprits are avoidable: opening new credit or financing a car, making large unexplained deposits, changing jobs, missing a payment, or being slow to send documents the underwriter asks for. A low appraisal or a title issue can also cause delays. The rule of thumb is to keep your finances boring and steady from application to closing — and ask your lender before making any big money move.

Mortgage Glossary

Quick plain-English definitions of the terms you’ll run into most often:

• Amortization: The schedule by which your loan is paid off over time. Early payments go mostly to interest; later payments go mostly to principal.
• Annual Percentage Rate (APR): The yearly cost of your loan including interest plus certain fees — a fuller comparison number than the interest rate alone.
• Adjustable-Rate Mortgage (ARM): A loan whose interest rate is fixed for an intro period, then adjusts periodically with the market.
• Closing costs: Fees to finalize your loan and purchase, typically 2%–5% of the price in Texas.
• Closing Disclosure: The final statement of your loan terms and costs, provided at least three business days before closing.
• Conforming loan: A loan at or below the annual conforming limit ($832,750 in Harris County for 2026) that can be sold to Fannie Mae or Freddie Mac.
• Conventional loan: A mortgage not insured or guaranteed by a government agency.
• Discount points: Optional upfront fees (1 point = 1% of the loan) paid to lower your interest rate.
• Debt-to-income ratio (DTI): Your monthly debt payments divided by your gross monthly income, as a percentage.
• Earnest money: A good-faith deposit held in escrow when your offer is accepted, applied toward closing.
• Escrow account: A lender-managed account that collects and pays your property taxes and insurance monthly.
• FHA loan: A mortgage insured by the Federal Housing Administration, allowing 3.5% down with a 580+ score.
• Fixed-rate mortgage: A loan whose interest rate — and principal-and-interest payment — never changes.
• Jumbo loan: A mortgage above the conforming limit, with stricter requirements.
• Loan Estimate: A standardized disclosure of your projected rate, payment, and costs, provided within three days of applying.
• Loan-to-value (LTV): The loan amount as a percentage of the home’s value. Lower LTV (a bigger down payment) usually means better terms.
• Mortgage Insurance Premium (MIP): FHA’s mortgage insurance — an upfront 1.75% premium plus an annual premium, generally for the life of the loan.
• Pre-approval: A lender’s verified commitment to lend up to a set amount, based on your credit, income, and assets.
• Principal & interest: The core of your mortgage payment — principal repays the balance, interest is the cost of borrowing.
• Private Mortgage Insurance (PMI): Insurance on conventional loans with less than 20% down; cancellable at 80% LTV.
• Rate lock: A lender’s guarantee to hold your interest rate for a set period while your loan is processed.
• Underwriting: The lender’s full review and verification of your loan before final approval.
• USDA loan: A zero-down loan for eligible rural and outer-suburban buyers, backed by the U.S. Department of Agriculture.
• VA loan: A zero-down, no-monthly-mortgage-insurance loan guaranteed by the VA for eligible veterans and service members.
• VA funding fee: A one-time fee on VA loans (2.15% for most first-time uses with no down payment), waived for disability-exempt veterans.