Homebuyer FAQ Series: Mortgage Basics Every Homebuyer Should Know

Buying a home is one of life’s biggest milestones, but the mortgage process can sometimes feel like it comes with more questions than answers. From closing costs to pre-approvals to mortgage insurance, it’s easy to get lost in the details. That’s why we’re kicking off our Homebuyer FAQ Series: four blogs running throughout October where we’ll answer real questions from real consumers who were in the same spot you are today.

This first post is all about the basics every homebuyer should know before diving into the mortgage process. Whether you’re a first-time buyer or brushing up before your next move, these answers will help you feel more prepared and confident as you take the next step toward homeownership.

What are the normal fees and costs associated with obtaining a mortgage loan?

Closing costs usually fall between 2–5% of the loan amount. They cover things like lender fees, appraisal, title services, and escrow. Some are flat fees, while others are percentages. Your lender is required to provide a Loan Estimate so you can see an itemized breakdown upfront.

What type of mortgage is best for me?

It depends on your situation. First-time buyers may benefit from FHA loans with low down payments. Veterans may qualify for VA loans with no down payment. Buyers of higher-priced homes may need a Jumbo loan. A good lender will compare options and explain how each fits your budget and long-term goals.

What is mortgage insurance (PMI), and when can I drop it?

PMI protects the lender when you put less than 20% down. It adds a monthly cost, but it doesn’t last forever. Once you reach 20% equity, you can usually request to have it removed. FHA loans are an exception; many require PMI for the life of the loan unless you refinance.

Should I escrow my property taxes?

With an escrow account, your lender collects money each month to cover taxes and insurance. Many buyers prefer this for convenience, but some prefer to pay directly for flexibility. The choice depends on your comfort level.

When should a consumer get pre-approved?

Get pre-approved before house hunting. It helps you know what you can afford and shows sellers you’re serious. Pre-approval often makes your offer stronger than one from a buyer who isn’t.

Can a family member gift money for a down payment?

Yes! Many programs allow family members to help with your down payment. You’ll need a gift letter to show the money isn’t a loan. The allowed amount varies by loan type, but this is a common way families help buyers get started.

Have more questions about mortgage basics? That’s what we’re here for. Connect with Luminate and we’ll walk you through your options, step by step.