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Frequently Asked Questions
Straight answers to the questions we hear most.
The primary advantage is access to a large amount of cash at a relatively low interest rate compared to other financing options like personal loans or credit cards. Since the loan is secured by your home, the interest rate is typically lower than unsecured debt.
The absolute minimum depends on the loan program:
Conventional Loan: Typically 620
FHA Loan: 500 (with 10% down) or 580 (with 3.5% down)
VA Loan: Varies by lender, but often 620
USDA Loan: Varies by lender, but often 640
It’s important to note that these are minimums, and a higher score will always secure better terms.
Conventional Loan: Typically 620
FHA Loan: 500 (with 10% down) or 580 (with 3.5% down)
VA Loan: Varies by lender, but often 620
USDA Loan: Varies by lender, but often 640
It’s important to note that these are minimums, and a higher score will always secure better terms.
Front-End DTI: This ratio only includes housing-related expenses. It’s your projected total monthly mortgage payment (principal, interest, taxes, insurance, and any HOA fees) divided by your gross monthly income.
Back-End DTI: This is the more commonly used ratio. It includes all your monthly debt obligations—such as your future mortgage payment, auto loans, student loans, credit card payments, and child support—divided by your gross monthly income.
Back-End DTI: This is the more commonly used ratio. It includes all your monthly debt obligations—such as your future mortgage payment, auto loans, student loans, credit card payments, and child support—divided by your gross monthly income.
In many cases, removing an escrow account is difficult once it’s established. However, some lenders may allow you to cancel escrow after you have built significant equity (often 20% or more) and have a strong, on-time payment history for a period of one or two years. You must request this in writing, and the lender is not obligated to agree. Government-backed loans (FHA, VA, USDA) often have stricter rules and rarely allow for cancellation.
An escrow account is held by your mortgage servicer to pay for your property taxes and homeowners insurance on your behalf. You pay a portion of these annual costs with each monthly mortgage payment. The servicer then manages the timely payment of these bills. Your escrow payment is reviewed annually, and your monthly amount may change if your tax or insurance premiums increase or decrease.
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