Top 11 Mortgage Questions Answered

Before you dive into the housing market, you’ll need to do your research to make sure you’re financially ready for a mortgage. We’ve answered the most common mortgage questions so you’ll be prepared to buy.

11 Mortgage Questions Answered

How Much House Can You Afford?

In general, you should spend 28% of your monthly gross (pre-tax) income or less on your monthly mortgage payment. That includes all costs associated with your mortgage — tax and insurance as well as principal and interest.

How Much Can I Borrow to Buy a House?

Lenders determine your maximum mortgage amount based on your debt-to-income (DTI) ratio. The mortgage can’t exceed 28% of your pre-tax income each month. You also need to have a total DTI of no more than 36%.

How Much Do I Need for a House Down Payment?

For a conventional loan, you’ll usually need to put down at least 5% of the mortgage amount. However, some programs have lower down payment requirements. For example, you may be able to get an FHA loan with 3.5% down, a VA loan with 0% down, or a USDA loan with 0% down depending on your financial situation, the property you plan to buy, and other factors.

How Much Is a VA Loan?

VA loans, available for eligible military members, veterans, and family members, don’t require a down payment and they come with low interest rates. However, you will have to pay some costs, including a funding fee that varies from 1.25% to 2.15% of the loan amount depending on your down payment percentage.

How Much Is Mortgage Insurance?

Private mortgage insurance varies between about 0.58% and 1.86% of the total loan amount per year. In other words, if you borrow $400,000 to buy your home, you may pay between $2,300 and $7,400 annually for PMI. That’s about $191 to $617 added to your monthly mortgage payment.

How to Get Rid of PMI Early?

Your lender must automatically cancel PMI at the halfway point of your loan or when you have at least 22% equity. However, you can get rid of PMI early by requesting cancelation when you have 20% equity. Your loan must be in good standing.

How to Calculate Loan-to-Value?

To find your home’s loan-to-value (LTV) ratio, divide the current mortgage balance by the current appraised value. For example, if you owe $200,000 on your loan and the property appraisal is $450,000, your LTV is 0.44. LTV of more than 1 means you owe more than the loan amount.

How Soon Can You Sell a House After Buying It?

You can sell a house as soon as you buy it if you want. However, you may have to pay federal capital gains tax if you make a profit on the home within two years of the original purchase.

How Does a Cash-Out Refinance Work?

With a cash-out refinance, you take out a new loan for the balance of your existing mortgage plus additional funds. The new loan will pay off the old mortgage and you’ll receive the rest as cash you can use to renovate your property, pay off other debt, or use for other expenses.

How Often Can You Refinance Your Home?

You can legally refinance your mortgage as many times as you want. However, most mortgage lenders do have limits. For example, you may have to wait six months after refinancing before refinancing again. 

How Soon Can I Refinance My House?

You can legally refinance your house right after your purchase, but most mortgage companies won’t let you get another loan so quickly. You’ll typically have to wait seven months after your purchase date for refinancing (210 days).

If your mortgage questions weren’t answered in this guide, we can still help. Contact one of the loan specialists at Supreme Lending to find the best mortgage for your needs.