Our Home Loan Buying Guide

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Determining if You’re Ready for the Commitment of Buying a Home

Buying a house is a big commitment, so before you start house hunting and comparing mortgage rates, take the time to examine your current situation and how it could change in the future.

Ask yourself:

  • Are you planning on any major life changes, like changing jobs or starting a family, in the next few years that could impact your financial situation?
  • Can you commit to staying in a home for at least five years?
  • Do you have a stable income?
  • Are you confident you can handle house repairs (or can take the time to learn), or are you willing to pay a specialist when something breaks?

How to Evaluate Your Financial Situation Before Buying a House

Buying a home is one of the largest purchases you’ll likely make, and it’s important to make sure your financial house is in order. Start by reviewing your bank accounts and billing statements to get a handle on how much money you’re making and spending each month. If you’re planning to buy a house with someone else (like your spouse), review their finances as well, and then ask yourself some questions:

  • Do you have a stable income/job?
  • Are you able to put away some money each month into a savings account?
  • Do you have a plan for managing debt, like student loans and car payments?
  • Do you typically pay your credit card debt quickly? Keeping your credit debt low will help you qualify for a better mortgage.
  • Do you have some money already saved up for emergencies? A good rule of thumb is having three months of income saved.
  • Do you have some money saved up for a down payment and closing costs? You should avoid using your emergency savings for this, or you could put yourself in a tight situation.

Determining Your Down Payment

How much you need for a down payment depends on the type of loan and how much the house costs, but the more you can put towards a down payment, the lower your monthly payment can be and the more you’ll save on interest. Conventional loans typically require a down payment of at least 5% of a home’s price. FHA loans require as little as 3.5%.

Along with your down payment, you’ll have to pay closing costs, or fees associated with processing and securing your loan. These can vary depending on the price of the house and the type of mortgage, but estimate between 2% and 5% of the home’s value.

How long do I need to own my house before it pays off?

Generally, we recommend you only consider buying a house if you plan to live there for at least five years, but this depends on a lot of factors, like the housing market, rental prices and how much equity you have in the house.

Buying vs. Renting a House

Each option has its benefits, so consider what matters to you.

Benefits of Buying

  • No landlord means you can make your house a home you want without anyone else’s approval.
  • Unlike rent payments, the interest you pay with your mortgage payments can be tax-deductible.
  • You can find a mortgage tailored to your budget and goals to keep your monthly payment from going up as the market changes.

Benefits of Renting

  • Your landlord is often responsible for home repairs and upgrades.
  • You won’t have to buy homeowners insurance or pay property taxes on your home.
  • Moving can be easier since you won’t have to sell your home or find renters.

How to Evaluate Your Financial Situation Before Buying a House

Buying a home is one of the largest purchases you’ll likely make, and it’s important to make sure your financial house is in order. Start by reviewing your bank accounts and billing statements to get a handle on how much money you’re making and spending each month. If you’re planning to buy a house with someone else (like your spouse), review their finances as well, and then ask yourself some questions:

  • Do you have a stable income/job?
  • Are you able to put away some money each month into a savings account?
  • Do you have a plan for managing debt, like student loans and car payments?
  • Do you typically pay your credit card debt quickly? Keeping your credit debt low will help you qualify for a better mortgage.
  • Do you have some money already saved up for emergencies? A good rule of thumb is having three months of income saved.
  • Do you have some money saved up for a down payment and closing costs? You should avoid using your emergency savings for this, or you could put yourself in a tight situation.

Determining Your Down Payment

How much you need for a down payment depends on the type of loan and how much the house costs, but the more you can put towards a down payment, the lower your monthly payment can be and the more you’ll save on interest. Conventional loans typically require a down payment of at least 5% of a home’s price. FHA loans require as little as 3.5%.

Along with your down payment, you’ll have to pay closing costs, or fees associated with processing and securing your loan. These can vary depending on the price of the house and the type of mortgage, but estimate between 2% and 5% of the home’s value.

The Three Elements of a Mortgage

Mortgages have three elements: a loan type, a rate type and a term. Knowing how these pieces work together can help you pick the best mortgage for you.

Loan Type

A mortgage’s type depends on if a government agency or private investors are involved, as well as the amount of the loan.

FHA loans are the easiest to qualify for. They require a low down payment and FICO® score, but they can cost more over time because they require you to pay a fee called mortgage insurance. You can get an FHA loan from any FHA-approved lender. These loans are insured by the Federal Housing Administration (FHA), which just means that the FHA protects lenders against loss from homeowners who default on their loans.

Conventional loans are a bit harder to qualify for, but they typically cost less over time than an FHA loan. You can avoid paying private mortgage insurance if your down payment is 20% or more. This can save you hundreds of dollars on your montly mortgage payment.

VA loans are exclusively for veterans, eligible surviving spouses and active-duty service members. VA loans offer the opportunity to buy a home with no down payment or private mortgage insurance.

Jumbo loans are mortgages that exceed the conventional loan limit. This simply means that you’ll need a jumbo mortgage if your loan amount is between $484,351 and $3 million.

Rate Type

There are two kinds of mortgage rates – fixed and adjustable – and you can pick the type of rate that matches your goals. You can see our current interest rates here.

A fixed-rate mortgage will stay the same for the life of your loan. This option keeps your month-to-month mortgage payment consistent and predictable. This is a great option for homeowners who plan to stay in their new home for a long time and want a regular payment to budget around.

An adjustable-rate mortgage will stay the same for the first 5, 7 or 10 years of the loan. Then, your rates will adjust up or down once per year depending on market conditions. An adjustable-rate mortgage offers the opportunity to get the lowest rate possible and is a good choice for homeowners who plan on moving or refinancing before the initial fixed-rate period ends.

Term

The term is the length of the loan. Most fixed-rate mortgages have 30- or 15-year terms, although you can choose any term from 8 to 30 years with an F5 Mortgage. Adjustable rate mortgages typically have a 30-year term.

Benefits of a Longer Term

A longer term can help keep your monthly payments lower, freeing up cash for home improvement projects or building your savings.

Benefits of a Shorter Term

A shorter term means you’ll pay off your mortgage sooner, pay less in interest and can build equity in your home faster.

The Many Parts of a Monthly Mortgage Payment

Monthly payments are usually composed of three portions: the principal, the interest, and the taxes and insurance (typically grouped together).

  • The principal goes toward paying down the balance of the loan. Any money paid toward your principal increases the amount of equity you have in the property.
  • The interest goes to your lender as a fee for borrowing money.
  • The taxes and insurance cover your property taxes and homeowner’s insurance premiums. This portion is only included in your payment if you have an escrow account, which is a special account that your lender uses to hold the money that’s used to pay your property taxes and insurance premiums. With an escrow account, you never have to worry about paying your tax or insurance bills since your lender takes care of that for you.

A Mortgage Approval Shows What You Can Afford

It can be tempting to start searching for a new home by browsing listings and scoping out potential neighborhoods. But before you fall in love with a house, you should get approved first. A mortgage approval will help you estimate your monthly payment and understand what you can afford.

What’s an approval?

An approval is a lender deciding that, based on the financial information you provide, you’re a good candidate for a mortgage. In the approval, you usually get an estimate of your loan amount, interest rate and what your monthly payment could be. This process can vary from lender to lender, and some lenders will call this a “preapproval” or a “prequalification”.

Why Getting Approved Is Important

Getting approved first has a few advantages:

  • You and your real estate agent will understand what you can afford so you don’t waste time looking at homes outside your budget.
  • You’ll be in the best position to make a strong offer on a house because the seller will know a lender already verified your finances.
  • After your offer is accepted, you’re less likely to run into surprises that could slow down closing the loan.

Keep in mind an approval is just the start of getting a mortgage. Once you find a house and make an offer, the house will need to pass inspections and be appraised by a third-party. Your approval amount could also change if your financial situation changes.

What Lenders Review

Mortgage lenders typically look at three criteria when deciding on how much you can borrow: your assets, your income and your credit.

Your Assets

Assets are items you own that could be turned into cash should the need arise. They include things like checking and savings accounts, stocks, real estate, personal property and more. Lenders review your assets to make sure you have some money set aside to make your mortgage payments after closing.

Your Income

Lenders review your income to ensure you can afford a monthly mortgage payment. They’ll also check your debt-to-income (DTI) ratio to make sure that the amount of debt you have doesn’t offset your income too much. Typically, a mortgage company will want to see you have a DTI below 50%.

Your Credit

Having good credit can help you qualify for a better interest rate because you’ve shown you’re a responsible borrower. Some mortgage lenders have minimum FICO® score requirements.

Will getting approved affect my credit score?

Getting approved for a mortgage involves pulling your credit report, and this can lower your score by a few points. However, if multiple lenders check your credit over a short period of time, the credit bureaus will count these inquiries as a single credit pull, and your score will only be lowered once.

Steps to Getting an Approval

Every mortgage lender has its own process for getting approved. At F5 Mortgage we have two levels of approval.

Prequalified Approval

The easiest way to get a Prequalified Approval is online through F5 Mortgage. After you create an account, you’ll:

  • Answer a few questions about your income and assets.
  • Give us permission to pull your credit report.

If you’re approved, you can download or print a Prequalified Approval Letter to share with your real estate agent to start house hunting.

Verified Approval

With a Verified Approval§, you can strengthen your bargaining position before you make an offer. Verifying your finances will help you make a stronger offer because it shows the seller you are able to buy the home. A Home Loan Expert will verify your income and assets within 24 hours, and you’ll get a Verified Approval Letter listing the amount you’re approved to borrow.

How long is an approval letter good for?

Approval letters generally expire after 90 days, though that can vary based on your type of loan. If you haven’t made an offer within 90 days of getting an approval letter, you should renew your approval before making an offer on a house.

How to Choose Your Mortgage Company

To get the mortgage that’s right for you, make sure you ask:

  • What are your rates and fees?
  • How much time on average do you take to close a purchase home loan?
  • What is your client satisfaction rating?
  • Will you service my loan after we close, or will you sell my loan to another company?
  • What’s your availability in case I have questions or need to get in touch?
  • Can we do this online or will I need a fax machine and stamps?

Why You Should Work with a Real Estate Agent

A real estate agent can make a big difference in the home buying process, and not just for the reasons you might think.

Find the Right House

First and foremost, your agent will help you find the right house. Agents have access to the MLS database, which means they know what homes are on the market, what features they have, and what they’re listed for. While real estate listing sites have this information and can be a good starting point, they’re not always 100% accurate or up to date.

Agents have also seen enough homes to know which ones are likely to have expensive problems. Your agent should be able to tell you what to look for and what to steer clear of, which is especially important if you’re a first-time home buyer.

Zero in on a Good Area

Finding the right house isn’t only about knowing which homes are up for sale. A real estate agent can help you zero in on the location that’s right for you. An experienced agent will help you find the very best school districts, amenities and resale values – or whatever is important to you.

Get a Guiding Hand

According to Toney Black, a real estate agent and broker affiliated with Allen Tate Real Estate and Rocket Homes Real Estate LLC, the primary benefit real estate agents provide is consultation. Black talks each of his clients through the home buying process before they even start house hunting so they know what they’re in for. While most homeowners will only buy a house a few times in their lifetime, agents go through the buying process with their clients day in and day out.

Manage the Paperwork

Do you know how to write a purchase agreement? Luckily, this isn’t something you need to worry about. Your agent will draw up the purchase agreement so all you have to do is read it and sign it. There’s a lot of paperwork involved in buying a home, and your agent is there to take care of it.

Make Connections

The buying process can be a whirlwind experience once you’ve had an offer accepted. There are so many things for you to take care of over the course of about a month, including getting an inspection, arranging movers, shopping for insurance, buying a home warranty and arranging for necessary repairs – and that doesn’t even cover getting a mortgage.

Luckily, your real estate agent has seen it all before. They know which inspectors can give you an accurate report, which movers are worthwhile, which insurance companies will overcharge you, and which home warranties have it all. Black even sets up the home inspection for many of his clients. “The only thing that they do themselves is call the insurance company,” he said.

Agents have also seen enough homes to know which ones are likely to have expensive problems. Your agent should be able to tell you what to look for and what to steer clear of, which is especially important if you’re a first-time home buyer.

How much does it cost to work with a real estate agent?

It’s free to work with a real estate agent if you’re buying a home. But this doesn’t mean your agent doesn’t get paid. The seller will pay the commission for both your agent and their agent. In most cases, the commission is 6%, with 3% going to each agent.

How to Find a Real Estate Agent You Can Trust

Agents play a big role in having a successful and stress-free home buying experience, so it’s important to find a good one.

Referrals can be a good place to start. Do you have family or friends who recently bought a home in your area? Can your lender give you a referral?

Once you’ve got a name or two, there are a few ways to know you’ve got the right person on your side. According to Black, “You definitely want a REALTOR over a regular real estate agent.” REALTORS® are real estate agents who are members of the National Association of REALTORS – and that’s important because it means they’re held to a strict code of ethics.

Black also recommends that you look for a real estate agent who holds a real estate broker license. This can be a great indication that they’ve gone above and beyond in their education.

More important than all of this, however, is finding an agent who respects you. “You’ve got a lot of agents that don’t carry any designations, but they carry all the characteristics of a good agent. At the end of the day, you want the agent to be trustworthy, loyal and full of respect for the client,” said Black.

Should I get approved by a lender or find an agent first?

Most real estate agents prefer that you get approved first. An approval gives your agent certainty that they won’t lead you down the wrong path by showing you homes outside your budget. You can save yourself time and heartbreak by learning your budget upfront.

Finding Homes for Sale

You’ve likely seen plenty of “For Sale” signs in front yards. But what’s the best way to locate available homes that match your goals and finances?

Searching online and exploring the neighborhood you want to live in can be a great start. Your real estate agent will also point out homes that match your goals and can help you keep an eye out for new homes on the market.

When browsing home listings, remember that you’re not just buying the building – you’re also buying a home that should match your lifestyle. Some aspects to keep in mind, aside from the house itself, include:

  • The neighborhood – If you’re looking for an area with lively nightlife, you might want to find a home closer to a downtown area. But if you’re hoping to get away from the city lights and sounds to a home with a nice yard and a bit more space, a suburb might be better for you.
  • The commute – If you’re switching locations in a significant way, consider how much time you’re comfortable spending on your commute to work.
  • The schools – If you have kids or think you might want kids someday, take some time to review the schools in the area. And even if you aren’t planning on having children, a good school district can add value to the home and make it easier to sell if you plan to move again.

How do I schedule a house viewing?

Once you find a house you’re interested in, your real estate agent can schedule a time for you to view the house, typically without the sellers or other potential buyers present. If you’re not working with an agent, you can contact the seller’s agent to schedule a viewing. Sellers may also host an open house as a chance for potential buyers to view the house.

What to Look for at the House Viewing

If you decide to make an offer, a home inspector will complete a more thorough review of the home, but there are some potential red flags you can look for upfront yourself:

  • Plumbing and electrical issues – Check all the light switches and electrical outlets. Make sure the faucets and toilets don’t leak, and look for evidence of water damage on the floors and ceilings.
  • Old appliances, chimneys and gas furnaces – If these items are older or haven’t been serviced recently, you may need to have them cleaned, repaired or replaced after buying.
  • Radon, lead paint and carbon monoxide – Ask the seller if the house has been tested for any of these. If it hasn’t, you can have these tests done as part of the inspection.
  • Full or defective gutters – If the home’s gutters are full or not working properly, they may be allowing rainwater to pool near the foundation of the home. This can be an expensive problem to fix.
  • Tree location and quality – Try to assess the likelihood that a tree might fall on the house during a storm or strong winds.

Deciding How Much to Offer

You’ve set your budget, you’ve looked at homes to buy and you’ve found one you love. So how do you know how much to offer? Staying inside your budget is important, but there’s more to getting the house you want than just picking a number. Here are some things to consider when deciding how much to offer:

  • Are there comparable homes for sale in the same area? Noting how long they’ve been on the market can give you an indication of how much competition you’re facing. The more competition you have, the stronger your offer should be.
  • How long has the house been on the market? If it’s been a long time (more than two or three months) or has been listed multiple times, the seller may be more willing to accept an offer below asking price.
  • Do you expect to have to compete against other buyers? If the house is in a highly desirable area, there’s a chance you could enter a bidding war. You’ll need to decide how high you’re willing to go before you make your initial offer. If you expect the home to have other bids, it might make sense to come with your strongest offer upfront.
  • Does the house require repairs or renovations? To help you stay on budget, keep these future costs in mind.

Can I offer more than I’ve been approved for?

Your approval letter will state the amount that you’re approved to borrow from the lender. You can offer a greater amount, but you’ll likely need a larger down payment to make up the difference. Check with your lender first to make sure you can get approved for a higher amount should your offer get accepted.

What to Include in Your Offer

When you’re ready to make an offer, your real estate agent can help you get in touch with the seller and submit the offer in writing. Chances are your real estate agent will write the actual offer letter, but here are some details it will include:

  • The address of the home
  • Your name and the names of anyone buying the house with you, like your spouse
  • The amount of your offer
  • Any contingencies you’re requesting (i.e., conditions that must be met before the sale is a done deal), such as a successful home inspection
  • Any seller concessions you’d like (i.e., things you’re requesting from the seller), such as cash toward closing costs
  • Items you want to include in the sale, like appliances and window treatments
  • The amount of your earnest money deposit
  • Your approval letter, so the seller will know that you won’t run into any financing problems
  • The date you expect to close
  • The date you want to move into the house
  • The deadline to respond to your offer

Can I ask the seller to make repairs to the house before I buy it?

Yes – it’s common for buyers to ask the seller to complete repairs as a contingency for you buying the house. You can also request that they make upgrades, like installing new carpet, but keep in mind that this could drive your purchase price up.

How to Negotiate the Purchase Price

If the seller accepts your initial offer, then great – you just bought a house! Your lender will send you a Loan Estimate outlining the fees and costs of your loan, but keep in mind these numbers could change up to 10% prior to closing the loan. Before you close, your lender will send you a Closing Disclosure detailing your final numbers so you can see exactly what you’re paying for.

If the seller counters your first offer or even just rejects it, how to proceed is up to you. Your agent can get in touch with the sellers to see how willing they are to negotiate, and you may trade counteroffers that negotiate not just the purchase price, but the other parts of your offer like the move-in date.

Negotiating can be stressful, so it’s important to keep your goals in mind. Don’t forget that it’s OK to walk away if you and the seller can’t agree. There will always be another house. This is a long-term purchase, so you should take a long-term view.

The Three Stages of Getting Ready to Close

Once your offer has been accepted, closing the loan involves three stages: the home inspection, the appraisal and underwriting. Knowing how these pieces work together can help you prepare to close your loan.

The Home Inspection

Once you’ve had an offer accepted, it’s time to schedule your home inspection. While this step is usually not a requirement for getting a mortgage, it’s a way to protect yourself from buying a home that will cost you more money than it’s worth. It’s your job to find an inspector and pay for the inspection. However, your real estate agent may be able to help with this. They can recommend an inspector and possibly even set up the inspection for you.

A typical home inspection will cover surface-level elements of the home such as structural components, outlets, heating and cooling systems, appliances and more. However, the inspector can’t check out aspects of the house that aren’t easily accessible or visible. For instance, you’ll need a specialized inspector to identify lead, mold, asbestos, radon and pest problems.

Be sure to attend your inspection and ask all the questions you can think of. This is your chance to walk through your new home with an expert. They can tell you about the red flags and make recommendations for what to fix first and how to go about it.

How much does a home inspection cost?

Home inspections typically cost between $200 and $500, although this can vary widely based on the inspector you choose, the size of the home and other factors. It’s important to remember that you get what you pay for; inspectors have varying levels of knowledge and experience, and they’re not required to be licensed in every state. If you opt for an inspection or test that’s not part of a standard home inspection, such as a radon test, you’ll pay an additional charge.

The Appraisal

Appraisals are a required part of the home buying process. The appraisal protects both you and your lender from paying more for a home than it’s worth. Your mortgage company will order the appraisal for you, although it’s important to note that the appraiser is always an independent third party. By law, appraisers can’t be affiliated with you or your mortgage company. This ensures the appraisal process is fair.

If the appraised value of the house comes back higher than your purchase price, good news! You just snagged a deal and some additional equity in your home. On the other hand, a lower-than-expected appraisal value can cause problems for your mortgage process since your lender will never lend more than the appraised value of the property. If your appraisal comes back low, you have a few options:

  • Bring more money to the table to make up for the difference in price
  • Negotiate with the seller to lower the home price
  • Contest the appraisal if you think there’s an error in the report
  • Walk away from the deal

How much does a home appraisal cost?

You can expect the appraisal to cost between $250 and $600, although this cost can vary based on the type and location of the property. You’ll pay more if you’re buying a multi-unit property, for example, or if you live in a remote area that the appraiser has to travel to.

Underwriting

While all of this is happening, your mortgage company will work on underwriting your loan. This is the process of verifying your income, assets, debt and property details to issue a final approval for the home loan. Our one-of-a-kind loan verification process ensures the underwriting of your home loan is as quick as possible helping you get into your dream home.

Much of this happens behind the scenes, but your mortgage company may ask you for additional documents during this time. For instance, they could ask for documentation that shows where deposits in your bank account came from or provides proof of additional assets. It’s important to stay on top of your lender’s requests to make sure you don’t slow down the loan process.

What You Can Do to Ensure Your Loan Closes

The biggest thing you can do to make sure you don’t run into problems is to avoid any major financial changes or spending. Don’t apply for new credit lines or loans, and don’t make purchases that will deplete your assets. You can do these things after your loan closes.

Taking on new debt changes your debt-to-income ratio (DTI), a key factor in determining the loan amount you can get approved for. If your DTI increases, you may be able to qualify for less – which could be a problem depending on your home price. If you push your DTI past about 45%, it’s possible you won’t qualify for a mortgage at all.

What Happens in the Days Before Closing

You found a home that meets your needs, got your offer accepted and got approved for a loan. Now, you’re finally ready to sign on the dotted line. Closing is where you’ll sign all of the mortgage paperwork and, in most cases, take possession of the property. Here’s what you need to know about closing

Acknowledge Your Closing Disclosure

Before your closing, you’ll get a document called a Closing Disclosure, which will include a summary of the final costs of your loan.

It’s important to acknowledge that you received the document as soon as possible. Your lender is legally required to give you the Closing Disclosure three business days before closing, so if you don’t acknowledge receipt of your Closing Disclosure quickly enough, your closing could be delayed.

How much can costs change between the Loan Estimate and the Closing Disclosure?

The costs outlined in the Closing Disclosure should be within 10% of the estimates that were provided to you in your Loan Estimate.

Attend a Final Walk-Through

In most cases, you’ll get to do a walk-through inspection of the property up to one day before closing to make sure everything is in order. This is to make sure the property is in the condition that was stated in your purchase agreement. Here are some questions to ask as you take one last look at the property before closing:

  • Were all the agreed-upon repairs completed?
  • Did the sellers leave behind all appliances, window treatments, etc., that were specified in the purchase agreement? Are these items in the condition you expected them to be in?
  • Did the sellers damage the property in the process of moving out?
  • Do the lights and faucets work?
  • Does the garage door open?
  • Has the seller removed all hazardous materials, such as old paint cans and construction materials?

If there are any major issues, you can ask to delay the closing or contact the listing agent to negotiate a fair solution.

What and Who to Bring to Closing

What You Should Bring

These are some items you must bring to closing:

  • Your driver’s license or other valid, government-issued photo ID
  • A cashier’s check or proof of wire transfer to pay your down payment and closing costs
  • Your Closing Disclosure to compare to the final paperwork
  • A list of key contacts, such as your agent or lawyer, in case you have questions

Who Should Attend

In general, all buyers who are going to be on the loan should plan to be at closing. It’s possible to close if you can’t be present, but you’ll need to give someone power of attorney.

In some states, the buyer and seller will both be at closing, whereas in other states each party attends a separate closing. In other words, you might see the seller at closing, but it’s not a guarantee.

You can expect a closing agent to facilitate the closing. They’re a neutral third party who will help both buyer and seller along the way. And of course, your real estate agent can attend, although this is not required.

What You’ll Pay for at Closing

At closing, you’ll get the keys to your home, and you’ll also need to pay any closing costs. Here’s a breakdown of the most common upfront costs:

Down payment:
Your down payment will become the equity you have in the home.
Escrow funds:
Your lender will collect these funds at closing to ensure there’s enough money in your account to pay tax and insurance bills as they come due.
Third-party fees:
This covers costs from third parties your lender uses to process your loan. These fees typically include appraisal fees, title insurance costs and credit report fees.
Per diem interest:
You’ll pay daily interest upfront to cover the period between closing and the date your first mortgage payment is due.
Homeowners association (HOA) dues:
If you’re moving somewhere that has HOA dues, you may be required to pay a year’s worth of dues at closing.
Discount points:
A point (or discount point) is a fee paid to lower your interest rate. If you’ve chosen to pay points, you’ll pay for them at closing.

Where Your Monthly Payment Goes

Each month, you’ll make a monthly payment to your lender that will go toward paying back the amount you borrowed (commonly called the principal), plus interest. Your monthly payment may also include mortgage insurance.

Your mortgage statements will show how your payment is broken up. Initially, the bulk of your payment will go toward paying down the interest on the loan, but over time, more of your payment will go to paying down the principal balance.

If you have an escrow account on your loan, part of your payment will go there. The amount of money that’s added to your payment for escrow depends on the amount of your taxes and insurance premiums. Your lender will analyze your account each year to make sure they’re collecting the appropriate amount of money, and they’ll adjust your payment if they’re collecting too little or too much.

When will my first mortgage payment be due?

Your first mortgage payment won’t be due for up to two months after closing. If you close on June 9, for example, you’ll pay per diem interest at closing to cover the period between June 9 and June 30. Then, your payment for the month of July will be due on August 1.

How to Handle a Missed Mortgage Payment

If you’re a few days late on your mortgage payment, you likely won’t have to pay a penalty. Most lenders have a grace period – usually around 14 days – when you can make your mortgage payment without an additional late fee. If you fail to pay before the grace period expires, you’ll likely pay a penalty. Plus, a late payment will lower your credit score.

What should I do if I’m going to miss a mortgage payment?

Contact your lender right away if you’re going to miss a mortgage payment. Missing multiple payments can hurt your credit score, but it can also lead you to default on the loan – and you could lose your house. If you’re experiencing a hardship, your lender may be able to create a payment plan to help you get back on track.

Qualify to buy a home with 3% down – or even 0% down for some loan options.

Find Out How Much You Really Need for a Down Payment

Saving up for a down payment for a new home? You may need less than you think. Many loan options are available with less than 5% down, and some mortgages are available with 0% down. While there can be advantages to putting more down, the down payment amount doesn’t have to hold you back.

Speak with an F5 MortgageHome Loan Expert to find the low down payment option that works for you. Or, apply and view your options online.

Popular Mortgages for Buying a Home with a Low (or No) Down Payment

  • FHA loans are available with a 3.5% down payment. Here’s what the numbers could look like: If you’re buying a $200,000 home and have good credit, your down payment may be $7,000 (that’s a 3.5% down payment).
  • Conventional loans, like a 30-Year Fixed, are available for 5% down – and even 3% down for well-qualified buyers.
  • Some loan programs, like a VA loan  or USDA loan, let you buy a home with 0% down.

Separate from the down payment, there will be closing costs, or fees associated with processing and securing your loan. These can vary depending on the price of the home and the type of mortgage, but estimate between 2% and 5% of the home’s value.

How Down Payments Work

A down payment is money you pay upfront when buying a home. How much you’re required to put down is determined by the price of the home and the type of loan you’re getting.

You may consider putting down more than what’s required. A bigger down payment upfront can save you money in the long run. The more you put down, the lower your interest rate and monthly payments will be.

The amount of your down payment and loan type will also determine whether you’re required to get mortgage insurance. If you need mortgage insurance, your monthly payment amounts will be higher.

Try out different numbers on our affordability calculators to see how your down payment and the loan type can affect your monthly payment.

The Benefits of Getting a Loan from F5 Mortgage

  • You get a completely online application supported by real people when you need them.
  • We service 99% of our mortgages, so our great customer service continues after you close.
  • We don’t charge you to make your mortgage payments online.
  • You can pay off your mortgage ahead of time with no penalties.
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