Mortgage FAQ

Common Mortgage Questions

Mortgages are the largest financial commitment most people make, and the industry is designed to be confusing. Jargon, fine print, and competing advice make it hard to know what actually matters. These are the questions borrowers should be asking — and the honest answers.

What’s the difference between rate and APR?

The rate is what you pay in interest on the loan balance. The APR (Annual Percentage Rate) includes the rate PLUS loan fees (origination, points, mortgage insurance premiums) spread over the loan term. A loan at 6.5% rate with $5,000 in fees might have a 6.72% APR. Compare APRs, not rates, when shopping lenders — APR is the true cost of borrowing. One exception: if you plan to refinance or sell within 5 years, the rate matters more because you won’t hold the loan long enough for the fee amortization in APR to be accurate.

How many lenders should I compare?

At least three, ideally five. The Consumer Financial Protection Bureau (CFPB) found that borrowers who get just one additional quote save an average of $1,500 over the life of the loan. Five quotes? Average savings of $3,000+. Mix your sources: try a big bank, a credit union, an online lender, and a mortgage broker. Brokers can access wholesale rates from multiple lenders, often beating retail pricing. Apply to all lenders within a 14-day window so the credit inquiries count as a single hit on your score.

Should I pay points to buy down my rate?

One discount point costs 1% of the loan amount and typically lowers your rate by 0.25%. On a $300,000 loan, one point costs $3,000 and saves roughly $50/month. Break-even: 60 months (5 years). If you’ll keep the loan 5+ years, points save money. Under 5 years, skip them. The math is simple: total cost of points ÷ monthly savings = months to break even. If break-even exceeds your expected time in the home, don’t buy points. Also watch for “negative points” (lender credits) — a lender pays your closing costs in exchange for a slightly higher rate. Good deal if you’re selling or refinancing within 3-4 years.

What’s PMI and how do I avoid it?

Private Mortgage Insurance is required on conventional loans with less than 20% down. It costs 0.5-1.5% of the loan amount annually, or $125-$375/month on a $300,000 loan. Ways to avoid it: put 20% down (obvious but not always practical), use a piggyback loan (80/10/10 structure — 80% first mortgage, 10% second mortgage, 10% down), choose a lender with LPMI (Lender-Paid MI, where the cost is baked into a slightly higher rate), or use a VA loan (no MI regardless of down payment). If you’re paying PMI now, request cancellation once you reach 20% equity — your servicer must cancel it at 78% LTV automatically, but you can request removal at 80% LTV if your payment history is clean.

Fixed or adjustable rate — which is better?

Depends on your timeline. Fixed rate gives you payment certainty for the entire loan term — you’ll never worry about rate increases. ARM gives you a lower initial rate (typically 0.5-1.0% below fixed) for a set period (5, 7, or 10 years), then adjusts annually. If you’re confident you’ll sell or refinance within the ARM’s fixed period, the ARM saves you real money. On a $400,000 loan, a 0.75% rate difference saves $200/month or $16,800 over 7 years. But if rates spike when your ARM adjusts and you can’t refinance (maybe your credit dropped or home values fell), your payment could jump $500-$800/month overnight. Only take an ARM if you have a clear exit plan.

Can I get a mortgage with student loan debt?

Yes, but your DTI (debt-to-income ratio) is what matters. Lenders cap total DTI at 43-50% depending on loan type. Your student loan payments count in that calculation. On $60,000 income ($5,000/month), with a $400/month student loan payment, you have $1,750-$2,100 left for housing costs to stay within 43-50% DTI. FHA is the most lenient with DTI limits. For income-driven repayment plans, most lenders use the IDR payment amount (not the standard repayment amount), which helps. If your student loans are in deferment, lenders typically calculate 0.5-1% of the loan balance as the monthly payment for DTI purposes.

What happens if my appraisal comes in low?

This is one of the most stressful situations in a real estate transaction. If you agreed to buy at $350,000 but the appraisal says $330,000, your lender will only loan based on the $330,000 value. You have four options: (1) the seller reduces the price to $330,000, (2) you bring an additional $20,000 cash to cover the gap, (3) you split the difference — seller comes down to $340,000, you bring $10,000 extra, or (4) you walk away using your appraisal contingency and get your earnest money back. Option 3 is the most common resolution. Having an appraisal contingency in your contract is critical — without it, you’re legally obligated to close at the agreed price or forfeit your earnest money.

How long does it take to get a mortgage?

Pre-approval: 1-3 days. Full mortgage process from application to closing: 30-45 days for conventional, 45-60 days for FHA/VA. The timeline depends mostly on how quickly you provide documentation and whether any issues arise during underwriting. Common delays: employment verification problems (job changes, self-employment), large unexplained deposits in your bank account, title issues (liens, boundary disputes), and appraisal complications. Speed tip: have your tax returns, pay stubs, bank statements, and W-2s organized before you apply. Every document the underwriter requests is a potential 2-3 day delay if you don’t have it ready.

Should I lock my rate?

Yes, as soon as you’re under contract and your lender offers a rate you’re comfortable with. A rate lock guarantees your rate for 30-60 days (typical lock period). Rates can move 0.25-0.5% in a single week during volatile periods — on a $400,000 loan, that’s $65-$130/month difference. Most locks are free for 30-45 days. Longer locks (60-90 days) may cost 0.125-0.25% of the loan amount. If your closing gets delayed past the lock expiration, you’ll need to extend (costs money) or re-lock at current market rates. Float-down options let you take a lower rate if rates drop after you lock, but these cost 0.25-0.5% upfront and rarely pay off.

Is it better to pay off my mortgage early or invest the difference?

Pure math says invest if your expected investment return exceeds your after-tax mortgage rate. At a 6.5% mortgage rate and 25% marginal tax bracket, your after-tax cost is ~4.9% (if you itemize). If you expect 8-10% average returns in the stock market, investing wins mathematically. But math isn’t everything. Paying off your mortgage eliminates a mandatory monthly obligation, reduces risk, and provides enormous psychological peace. A reasonable middle ground: make sure you’re capturing your full 401(k) match and maxing your Roth IRA first, then put any extra toward the mortgage. The “right” answer depends on your risk tolerance and how much you value the security of owning your home free and clear.

Dive deeper with our mortgage calculator, pre-approval guide, and best lenders comparison.