Home loans that help you reach your goals

How much are closing costs?

Closing costs vary, as they depend on many factors. Closing costs typically include the homeowner’s insurance premium for the year (on the new home), survey fees, appraisal fees, recording fees, real estate agent commissions (as applicable), and any other fees. We recommend budgeting 3% - 6% of the loan amount for closing costs.

What financial information do lenders review?

The financial information reviewed by a lender depends on the type of inquiry requested by the prospective borrower. In some situations, a home buyer may choose to get prequalified for a mortgage. This allows the prospective borrower to receive an estimate related to the loan amount (and interest rate) for which they may qualify.

Getting prequalified is a soft pull on the individual’s credit; the inquiry does not impact the credit score, and the lender may only review basic financial information like income, employment history, monthly debt payments, assets, and personal demographics. This information is typically self-reported. Prequalification does not mean an individual is approved for a loan amount; this inquiry is strictly for informational insight.

Mortgage preapproval requires a deeper look into an applicant’s financial history, and a preapproval is a hard credit inquiry that results in a slight credit score drop. Lenders assess the individual’s credit score and credit history, employment, income, assets, and any other relevant financial information.

What documents does a mortgage lender need for a preapproval?

A preapproval determines an estimated borrowing threshold. When a home buyer is preapproved, they receive a letter from the lender highlighting their estimated borrowing amount. During the preapproval process, mortgage applicants must provide identification, tax documents, pay stubs, bank statements, and their social security number.

A preapproval also does not mean that the individual is approved for a mortgage. Once an individual makes an offer on a home, the lender will require an appraisal and other information for a formal approval. The final approval process requires another hard credit inquiry, ensuring that no financial (or credit) details have changed.

What is a good credit score for a mortgage?

Each lender may stipulate specific credit score requirements for mortgages. Rocket Mortgage requires a credit score of 620 for most conventional mortgages and a credit score of 580 for Federal Housing Administration (FHA) loans and Department of Veterans Affairs (VA) loans.

Who pays for a home appraisal?

Typically, the buyer is responsible for the cost of a home appraisal. However, the buyer may negotiate with the home seller to cover this cost.

Why do I need a home appraisal?

Home appraisals are a crucial part of the lending process. Lenders need to know the value of the home, ensuring the loan amount does not exceed the value of the home and that the loan-to-value (LTV) ratio doesn’t pose an undue financial risk to the lender.

Each loan type and lender may stipulate a maximum LTV ratio. Lenders require an LTV ratio of 80% or less to remove private mortgage insurance (PMI) payments from the mortgage cost.

Do first-time home buyers need a down payment?

Most mortgages require that home buyers allocate a down payment. The exceptions are loans backed by the Department of Veterans Affairs (VA loans) and United States Department of Agriculture (USDA) guaranteed loans. Rocket Mortgage does not offer USDA loans.

First-time home buyers may be eligible for other loan types that offer lower down payment requirements – like Federal Housing Administration (FHA) loans. In addition, Rocket Mortgage offers two loan products with lower down payment requirements: ONE+ By Rocket Mortgage® and HomeReady® and Home Possible®.

First-time home buyers also may qualify for down payment assistance programs.

What is a loan term?

Mortgage terms refer to the length of the loan. The most common mortgage term is 30 years (360 months). Some home buyers want to finance their home for a shorter duration of time (opting for a 15-year mortgage), while others may find that a 30-year mortgage is the more affordable choice.