Home Loans 101
Your plain-English guide to mortgages — what they are, how qualifying works, and which loan type fits your situation. Written by a licensed loan officer since 2005, not a content marketer.
- Side-by-side Conventional, FHA, VA, Jumbo & Non-QM comparison
- Real down-payment minimums for every program
- The 8-step closing timeline, with realistic time estimates
- Glossary of 20+ mortgage terms, no jargon
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OnPoint Mortgage Pro · NMLS #2134550 · Headquartered in Irvine, California · Licensed in CA, CO, FL, ID, MD, NH, SC, TX, VA · Equal Housing Lender
What Is a Mortgage, Actually?
A mortgage is a loan secured by the home itself. If you don't pay, the lender can take the property — that collateral is why mortgage rates are dramatically lower than credit-card or personal-loan rates.
The mortgage process has three parties: you (the borrower), the lender (who funds the loan), and the investor (who actually buys the loan from the lender on the secondary market — usually Fannie Mae, Freddie Mac, Ginnie Mae, or a private investor). The lender follows the investor's rules for who qualifies, because the lender plans to sell the loan within 30-60 days of closing.
OnPoint Mortgage Pro is a wholesale broker, not a single lender. We submit your loan file to 20+ wholesale lenders simultaneously and use the best pricing from whichever one is most competitive that week. The retail-bank model has you applying to one lender at a time, hoping you got the right one.
The Five Things Lenders Check
Every mortgage lender evaluates your file on the same five dimensions:
- Credit: usually FICO score (most programs need 580-620+); they look at score, payment history, and any recent collections, late payments, bankruptcies, or foreclosures.
- Income: 2 years of W-2 or self-employment history, current pay stubs, year-to-date earnings. Stability matters as much as amount.
- Assets: down payment funds, closing-cost funds, and reserves (extra cash you'd have left after closing). Source and seasoning of funds matter.
- Debt-to-Income (DTI): your total monthly debt obligations divided by gross monthly income. Most programs cap DTI at 43-50% — see the table below.
- The Property: appraisal, condition, type (single-family, condo, manufactured), and use (primary residence, second home, investment).
If you want a custom read on your specific file, our affordability calculator lets you plug in income, debts, and credit score for an instant DTI check, or use the form at the bottom to send your scenario to Victor for a real review.
Loan Programs Side by Side
Five mainstream programs, one quick-glance table. Click any program name to read its dedicated guide.
| Conventional | FHA | VA | Jumbo | Non-QM | |
|---|---|---|---|---|---|
| Min Down Payment | 3% | 3.5% | 0% | 10-20% | 10-25% |
| Min Credit Score | 620 | 580 | 580* | 680-700 | 600-660 |
| Max DTI | 50% | 57% | No cap* | 43-45% | 50-55% |
| Mortgage Insurance | Until 20% equity | Life of loan | None | None | Varies |
| 2026 Loan Limit | $806,500 | $806,500 | No cap | Above $806,500 | No cap |
| Best Used For | Strong credit + down | Low credit / low down | Veterans, active duty | Luxury / high-cost areas | Self-employed, ITIN, investors |
| Read Full Guide | Open → | Open → | Open → | — | Open → |
* VA: credit score is set by individual lenders, not the VA itself. Most lenders apply 580-620 overlays. VA underwrites to residual income rather than a hard DTI cap. Limits shown are 2026 conforming baselines; high-cost county limits go higher.
The Six Variables That Drive Your Rate
Two borrowers at the same lender on the same day can get rates 1-2% apart based on these six factors. Knowing them in advance helps you optimize your file before applying.
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1. Credit Score
Single biggest factor. A 760+ score gets the best pricing tier; a 660 score adds roughly 0.5-1.0% to the rate on the same loan. Each 20-point band has its own pricing.
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2. Loan-to-Value (LTV)
Your loan amount divided by home value. Lower LTV (bigger down payment) = lower rate. 80% LTV is the sweet spot; below 80% removes PMI on conventional loans.
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3. Debt-to-Income (DTI)
Your monthly debts divided by gross monthly income. Most programs cap at 43-50%. Going above conforming limits triggers tighter pricing or program ineligibility.
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4. Occupancy
Primary residence rates are the lowest. Second home rates are typically 0.25-0.50% higher. Investment property rates run 0.75-1.50% higher than primary.
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5. Property Type
Single-family homes price best. Condos, manufactured homes, and 2-4 unit properties have small pricing adjustments. Co-ops and unique properties can be tricky.
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6. Loan Amount
Conforming loans (under $806,500 in 2026 baseline counties) get the best pricing. Jumbo loans (above conforming) have separate pricing. Very small loans (under $100k) also get penalized.
Down Payment 101
You do not need 20% down to buy a home. Below are the real minimums by program. The 20% number gets quoted because that's when you avoid PMI on conventional loans, not because anything below 20% is impossible.
| Program | Min Down | Notes |
|---|---|---|
| VA Loan | 0% | Eligible veterans / active-duty service members. No PMI ever. |
| USDA Rural | 0% | Properties in USDA-eligible rural areas. Income limits apply. |
| Conventional 97 | 3% | First-time buyer or income-qualified. PMI until 20% equity. |
| FHA | 3.5% | 580+ credit score required for 3.5% down. Below 580 needs 10% down. |
| Conventional Standard | 5% | Wider eligibility than Conventional 97. PMI until 20% equity. |
| Jumbo | 10-20% | Varies by lender. Some go 5% with strong reserves. |
| Investment Property | 15-25% | 1-unit usually 15%; 2-4 unit usually 25%. |
Down Payment Assistance (DPA)
Most states offer DPA programs that cover 3-5% of the home price as a grant, forgivable loan, or low-rate second loan. OnPoint is licensed in 9 states and we work with each state's DPA:
- California: CalHFA, GSFA Platinum, MyHome Assistance
- Texas: TSAHC Home Sweet Texas, TDHCA My First Texas Home
- Florida: Florida Hometown Heroes, Florida Assist
- Other states: CHFA (CO), IHFA (ID), MMP (MD), NH Housing, SC Housing, VHDA (VA)
DPA usually layers on top of an FHA or Conventional 97 loan. Income limits and home-price caps apply. Talk to a loan officer about your specific state.
What's Actually in Your Monthly Payment
When lenders say "PITI," they mean the four components that make up your full monthly housing cost. Most "mortgage payment" quotes you see online only show P&I — here's the full picture.
PPrincipal
IInterest
TTaxes
IInsurance
+HOA / PMI
Principal
The portion of each payment that reduces what you owe on the loan. Small in early years (most of payment goes to interest), grows over time as the balance decreases.
Interest
The cost of borrowing the money. Calculated monthly on the remaining loan balance. Bulk of your payment in the first 10-15 years on a 30-year loan.
Taxes (Property Tax)
Collected by the lender monthly, held in an escrow account, paid to your county/city when the tax bill is due. Tax rates vary 0.5-2.5% of home value depending on state.
Insurance (Homeowners)
Also escrowed and paid by the lender annually. Typically $800-$2,500/year depending on location, home value, and coverage. Required by every lender.
PMI / MIP (Mortgage Insurance)
Required when down payment is under 20% on Conventional loans (PMI) or any FHA loan (MIP). 0.3-1.5% of loan amount annually. Conventional PMI drops off at 20-22% equity; FHA MIP usually stays for the life of the loan.
HOA Dues (if applicable)
Not technically part of the mortgage, but a required monthly housing cost for any home in a homeowners association. Lenders include it in DTI calculations even when paid separately.
The Closing Process — 8 Steps
Most mortgages close in 30-45 days from application. Here's what happens at each stage with realistic time estimates.
1
Pre-Qualification 15 min
Quick conversation about income, debts, credit, and down payment. No documents required. Gives you a rough loan amount and rate range. Free, no credit pull, no commitment.
2
Pre-Approval 1-3 days
Submit pay stubs, W-2s, tax returns, bank statements. Lender runs credit and verifies income. Issues a pre-approval letter you'll use to make offers. Letter is good for 60-90 days.
3
House Hunting + Offer Variable
Find a home, make an offer, sign a purchase contract. Most agents want to see your pre-approval before submitting an offer. This phase length is 100% up to you and the market.
4
Loan Application Same day
Once the seller accepts your offer, you formally apply for the mortgage. Lender provides a Loan Estimate within 3 business days showing exact terms, rate, and fees.
5
Appraisal & Inspection 1-2 weeks
Lender orders an independent appraisal to confirm the home is worth what you're paying. You separately order a home inspection. Both usually happen in week 1-2.
6
Underwriting 1-3 weeks
Underwriter reviews your full file: income, assets, credit, appraisal, title report. May request additional documents (called "conditions"). This is the most variable phase.
7
Clear to Close 2-5 days
All conditions cleared. Lender issues final approval. Title and escrow prepare closing documents. You'll receive the final Closing Disclosure 3 business days before signing.
8
Closing 30-60 min
Sign the final loan documents (usually 80-120 pages). Bring a cashier's check or wire for closing costs and any down payment balance. Loan funds, deed records, keys delivered.
Common Mistakes to Avoid
The five things that derail more first-time-buyer mortgages than anything else — and how to avoid each one.
Mistake 1
Opening new credit during the loan process
Don't apply for a car loan, credit card, or store financing between pre-approval and closing. Even a small new account drops your credit score and may re-trigger underwriting. Wait until after you have the keys.
Mistake 2
Making large unexplained deposits
Underwriters need to source every dollar of down-payment money. A $5,000 deposit from "selling stuff" without paper trail can stall your file. Document gifts with a signed gift letter; sell things via traceable platforms.
Mistake 3
Changing jobs mid-application
Lenders verify employment within 10 days of closing. A job change during the process — even to higher-paying role — can re-trigger income docs and delay closing 1-3 weeks. Stay put until you have the keys.
Mistake 4
Skipping the inspection to win the offer
Waiving inspection in a hot market is increasingly common but financially risky. A $500 inspection can save you $50,000 in surprise repairs. If you must waive, hire a contractor to do a "walkthrough" instead — less protective but better than nothing.
Mistake 5
Shopping rate only at one lender
Rate spreads between lenders on the same loan are routinely 0.25-0.50%, sometimes more. Going to a single bank means accepting whatever pricing they offer that day. A wholesale broker compares 20+ lenders for you in one application — that's literally our business model.
Mortgage Glossary
The 24 mortgage terms you'll hear most often, defined in plain English.
APR (Annual Percentage Rate)
The interest rate plus most lender fees expressed as an annualized cost. Always higher than the interest rate. Best metric for comparing two loans with different fee structures.
Adjustable Rate Mortgage (ARM)
A mortgage where the rate starts fixed for an introductory period (5, 7, or 10 years) then adjusts annually based on an index. Lower starting rate than fixed but uncertainty after the intro period.
Amortization
The schedule of how each payment splits between principal and interest. Early payments are mostly interest; later payments are mostly principal. Standard mortgages are fully amortizing over 30 years.
Appraisal
An independent valuation of the property by a licensed appraiser. Required by the lender to confirm the home is worth at least the purchase price. Typically costs $500-$700.
Closing Costs
Fees paid at closing: lender fees, title insurance, escrow, recording fees, prepaid interest, first year's homeowners insurance. Typically 2-4% of the loan amount.
Closing Disclosure (CD)
Federally-required form showing final loan terms and exact closing costs. Must be received 3 business days before signing. Compare to the Loan Estimate to confirm nothing changed unfavorably.
Conforming Loan
A mortgage at or under the Fannie Mae / Freddie Mac loan limit ($806,500 in most 2026 counties). Conforming loans get the best pricing because they're eligible for the most efficient secondary market.
Debt-to-Income (DTI)
Total monthly debt obligations divided by gross monthly income. Most loans cap DTI at 43-50%. Lower is better — gives you a buffer for unexpected expenses.
Down Payment
The portion of the home price paid in cash at closing. The remainder is the loan amount. Range: 0% (VA) to 25% (some investment property).
Earnest Money
A good-faith deposit (typically 1-3% of purchase price) you put down when your offer is accepted. Held in escrow; applied to your down payment at closing. Lost if you back out without contractual cause.
Escrow
A neutral third party that holds funds and documents during the transaction. Also: the monthly account your lender maintains to pay property tax and homeowners insurance on your behalf.
FHA Loan
A loan insured by the Federal Housing Administration. Lower credit and down payment requirements than conventional, but charges MIP (mortgage insurance premium) for the life of the loan in most cases.
Fixed-Rate Mortgage
A mortgage where the interest rate is locked for the entire loan term. Most common: 30-year fixed and 15-year fixed. Payment never changes.
HELOC
Home Equity Line of Credit. A revolving credit line secured by your home, similar to a credit card. Variable interest rate. Often 1.5-3% higher than a 1st mortgage rate.
Jumbo Loan
A mortgage above the conforming loan limit ($806,500 in most 2026 counties, higher in high-cost areas). Pricing and underwriting are stricter than conventional.
Loan Estimate (LE)
Federally-required form provided within 3 business days of application showing estimated rate, fees, and terms. Use it to compare offers from different lenders.
Loan-to-Value (LTV)
Loan amount divided by home value, expressed as a percentage. 80% LTV means 20% equity. Lower LTV = lower rate AND lower PMI cost.
MIP (Mortgage Insurance Premium)
FHA's version of mortgage insurance. Includes both an upfront premium (1.75% of loan, financed) and a monthly premium (typically 0.55% of loan annually). Usually lasts the life of the loan.
PMI (Private Mortgage Insurance)
Conventional loan mortgage insurance, required when down payment is under 20%. 0.3-1.5% of loan amount annually. Cancels automatically when you reach 22% equity (78% LTV).
Points (Discount Points)
Prepaid interest paid at closing to lower your rate. One point = 1% of the loan amount = roughly 0.25% rate reduction. Pays off if you keep the loan past the break-even (usually 4-6 years).
Pre-Approval
Lender's conditional commitment to lend based on full income and credit review. Stronger than pre-qualification. Required by most sellers' agents before they'll accept your offer.
Rate Lock
An agreement that fixes your interest rate for a specific period (15-60 days typically). Protects you from rate increases between application and closing.
Title Insurance
Protects against title defects (liens, encroachments, prior fraud) on the property. Two policies: lender's (required) and owner's (optional but recommended). One-time premium at closing.
VA Loan
A loan guaranteed by the Department of Veterans Affairs. Available to eligible veterans, active-duty service members, and surviving spouses. No down payment, no PMI, generally lowest rates available.
The 28/36 Rule (How Much Can You Afford?)
A widely-used affordability benchmark. The number a lender will approve is usually higher than the number you can comfortably afford. The 28/36 rule helps you find the latter.
- 28% rule: Total monthly housing costs (PITI + HOA) should not exceed 28% of your gross monthly income. This keeps you comfortable.
- 36% rule: Total monthly debt (housing + car + student loans + credit cards) should not exceed 36% of gross monthly income.
- Underwriting actually allows higher: Conventional permits DTI up to 50%, FHA up to 57%, VA has no formal cap. The 28/36 rule is a comfort target, not the legal limit.
Worked example: Household income of $10,000/month gross. 28% of that is $2,800 — that's your max comfortable PITI + HOA. 36% is $3,600 max total debt including housing. If you already pay $600/month in car and student loans, your housing cap drops to $3,000 by the 36% rule, but the lower number ($2,800 from the 28% rule) wins.
Ready to Talk to a Real Loan Officer?
Article-style answers help you orient. Specific advice for your file requires looking at your actual income, credit, and goals — that's a 15-minute conversation.
Victor Santos
Senior Loan Officer · NMLS #888844 · 20+ Years
Originating mortgages since 2005. Personal phone & email, no callback queues, no junior reps. Will give you a straight answer on which loan program fits your file, what closing costs will actually be, and whether the timing is right — even if the answer is "wait six months."
Frequently Asked Questions
How much income do I need to buy a $500,000 house?
Rough rule: gross annual income roughly 3x the home price for a comfortable purchase. So $500,000 home = $150,000+ household income. Lenders may approve you with less by stretching DTI, but the 28/36 rule says ~$150-160k is the comfort zone for a $500k home in most states. State-tuned numbers via the affordability calculator.
What's the minimum credit score to get a mortgage?
Officially: 580 FICO for FHA with 3.5% down (or 500 with 10% down); 620 for Conventional. In practice, most lenders apply "overlays" that push these higher. Scores under 620 should expect higher rates AND tighter approval, even on FHA. If you're below 620, spend 4-6 months improving credit before applying — the rate savings will dwarf the wait.
Should I get pre-qualified or pre-approved?
Pre-qualified is informal (15 minutes, no docs, rough estimate). Pre-approved is formal (lender pulls credit, reviews documents, issues a letter). Most sellers' agents want a pre-approval letter before accepting your offer. Pre-qualification is fine for the early "what can we afford" conversation; pre-approval is needed before you submit offers.
How long does it take to close on a mortgage?
30-45 days from formal application is typical for purchase loans. Streamline refinances (VA IRRRL, FHA Streamline) can close in 15-25 days because they skip appraisal and most income docs. The biggest variables are appraisal turn time and underwriting condition responses.
What documents do I need to apply?
Standard W-2 file: last 2 years W-2, last 2 pay stubs, last 2 months bank statements, last 2 years federal tax returns (1040 + all schedules). Self-employed: add personal and business tax returns for 2 years + YTD profit-and-loss. Investment property: rent rolls and leases. Have these scanned and ready before applying — it cuts 5-10 days from underwriting.
Can I qualify with a co-borrower or co-signer?
Yes. Co-borrowers have ownership interest in the property; their income and debts are counted in DTI. Co-signers (non-occupant co-borrowers on FHA) are allowed and help income-qualify without giving up ownership. Both options are valid for parents helping adult children buy a first home.
What's the difference between a broker, a bank, and a credit union?
A bank funds loans with its own money — you apply, they say yes or no. A credit union is similar but member-owned, often slightly better rates for members. A mortgage broker (like OnPoint) doesn't fund loans — we submit your file to 20+ wholesale lenders simultaneously and broker the best pricing. The broker model usually wins on rate because of competition, but matters less if you happen to bank with a credit union offering aggressive member pricing.
Are there closing costs I can avoid?
Yes — lender-side fees (origination, processing, underwriting) are negotiable; third-party fees (appraisal, title, escrow, recording) are not. A "no-points" or "no-closing-cost" loan typically raises the rate to recover those costs — runs the same total over the loan life, just shifted in time. See our no-points refi structure.
Should I lock my rate at application or wait?
If rates have been rising or your closing is more than 30 days out, lock at application. Locks are typically 30-45 days standard, 60 days available at slight cost. The risk of "waiting for a better rate" is that rates rise instead. The classic advice "marry the house, date the rate" applies: lock today and refinance later if rates fall meaningfully.
What if I'm self-employed?
Three paths: (1) Conventional/FHA/VA using 2 years of personal + business tax returns (write-offs reduce qualifying income, which can hurt). (2) Bank Statement Loans (Non-QM) using 12-24 months of business deposits as income (no tax returns needed). (3) DSCR loans for investment properties (qualifies on rental income, not personal income). Read the Non-QM guide.
What's the difference between rate and APR?
Rate determines your monthly P&I payment. APR is rate plus most lender fees expressed as an annualized cost. APR is always higher than rate. When comparing offers from different lenders, look at APR — a 6.0% rate with $8,000 in fees is more expensive than a 6.25% rate with $1,500 in fees, and APR makes that obvious.
Is the mortgage interest deduction worth it for me?
Probably not, for most filers. The 2017 standard deduction increase (,200 married / ,600 single in 2024-2025) means roughly 90% of taxpayers take the standard deduction rather than itemize. Mortgage interest matters tax-wise only if your itemized deductions (mortgage + property tax + charitable + state/local tax) exceed the standard. Talk to a CPA for your specific situation.
Ready to Move From Reading to Applying?
Send your scenario through the affordability calculator, or call Victor for a 15-minute pre-qualification call. No credit pull, no commitment.
(877) 870-0007Disclosures
This page is for educational purposes. None of the information here is a loan offer, loan estimate, or commitment to lend. Actual loan terms depend on the specifics of your file (credit, income, assets, property) and current market conditions. Loan limits, qualifying thresholds, and program rules are summarized for clarity and may not capture every exception. Always confirm program-specific eligibility with a licensed loan officer.
OnPoint Mortgage Pro · NMLS #2134550 · Equal Housing Lender. Licensed in California, Colorado, Florida, Idaho, Maryland, New Hampshire, South Carolina, Texas, and Virginia. All loans subject to credit approval. Rates and program details current as of 2026 and subject to change. Information about VA, FHA, USDA, and conforming loans is sourced from the respective agency guidelines as of 2026.