Lending Buddy home loans make it easier to take the first step toward buying or refinancing a home. Through one free request, we connect you with licensed mortgage partners that offer FHA loans, conventional fixed-rate mortgages, first-time homebuyer programs, and refinancing. Lending Buddy itself isn't a mortgage lender and doesn't make credit decisions—our partners do. What we provide is a simpler starting point and clear, honest information so you walk into the process prepared.
A mortgage is likely the largest loan you'll ever take on. This page explains the main loan types, how the process works, what it really costs, and how to get ready so you can compare offers with confidence.
Mortgage Options Through Lending Buddy
FHA loans
Loans insured by the Federal Housing Administration are popular with first-time buyers and borrowers who are still building credit. With a credit score of 580 or higher, the minimum down payment is 3.5%. Borrowers with scores from 500 to 579 may qualify with 10% down. Individual lenders can set stricter requirements than FHA minimums. FHA loans require mortgage insurance premiums (MIP): an upfront premium, currently 1.75% of the base loan amount for most purchase loans, plus an annual premium paid monthly. On most FHA loans with less than 10% down, annual MIP lasts for the life of the loan; with 10% or more down, it typically ends after 11 years.
Conventional fixed-rate mortgages
Conventional loans aren't government-insured. A fixed-rate mortgage keeps the same interest rate, and the same principal-and-interest payment, for the entire term, most commonly 15 or 30 years. Some conventional programs allow as little as 3% down for qualifying buyers, though many lenders look for a credit score of at least 620. If you put down less than 20%, you'll usually pay private mortgage insurance (PMI). Unlike FHA's annual MIP on low-down-payment loans, PMI can generally be canceled once you reach 20% equity, and it ends automatically when your balance is scheduled to reach 78% of the home's original value. Wondering whether fixed or adjustable is right for you? Read fixed vs. adjustable-rate mortgages.
First-time homebuyer programs
Many states and cities offer down payment assistance, closing cost grants, or reduced-rate loans for first-time buyers, often paired with FHA or conventional financing. "First-time" frequently means you haven't owned a home in the past three years, so you may qualify even if you owned one long ago. Our first-time homebuyer FHA guide walks through the basics.
Refinancing
Refinancing replaces your current mortgage with a new one. People refinance to lower their rate or payment, switch from an adjustable to a fixed rate, shorten their term, or take cash out of their equity. FHA borrowers may also be eligible for a streamlined refinance with reduced documentation.
Comparing FHA and Conventional Loans
| Feature | FHA loan | Conventional loan |
|---|---|---|
| Minimum down payment | 3.5% (580+ score); 10% (500–579) | As low as 3% on some programs |
| Typical credit expectation | More flexible | Often 620 or higher |
| Mortgage insurance | Upfront and annual MIP | PMI if less than 20% down |
| Removing insurance | Often lasts the life of the loan with under 10% down | Can be canceled at 20% equity; ends automatically at 78% LTV |
| Best fit | Lower scores or smaller savings | Stronger credit; plans to drop PMI |
How the Home Loan Process Works
- Submit your request. Tell us whether you're buying or refinancing, your estimated price or home value, and basic income and credit details.
- Get connected. We may connect you with a licensed mortgage partner who serves your area.
- Pre-approval. The partner reviews your credit, income, assets, and debts and may issue a pre-approval letter so you can shop with a clear budget.
- Loan Estimate. After you apply, the lender must give you a standardized Loan Estimate within three business days showing your rate, payment, and closing costs.
- Underwriting and appraisal. The lender verifies documents and orders an appraisal to confirm the home's value.
- Closing Disclosure. You'll receive it at least three business days before closing. Compare it with your Loan Estimate.
- Closing. You sign the final documents, pay closing costs and your down payment, and receive the keys—or, for a refinance, your old loan is paid off.
What a Home Loan Really Costs
Beyond your down payment, plan for closing costs, which commonly run about 2% to 5% of the loan amount. They can include origination or underwriting fees, an appraisal, title insurance, recording fees, and prepaid items like homeowners insurance, property taxes, and interest.
Here's a hypothetical FHA purchase example. It's for illustration only and is not a rate quote or offer.
| Hypothetical FHA purchase | Amount |
|---|---|
| Home price | $300,000 |
| 3.5% down payment | $10,500 |
| Base loan amount | $289,500 |
| Upfront MIP (1.75%), if financed | $5,066.25 |
| Estimated closing costs (2%–5% of base loan) | $5,790–$14,475 |
| Principal and interest at a hypothetical 6.5% fixed, 30 years (with upfront MIP financed) | $1,861.86 per month |
That monthly figure doesn't include annual MIP, property taxes, homeowners insurance, or HOA dues, which can add several hundred dollars. For comparison, a 3% conventional down payment on the same home would be $9,000, while 20% down—avoiding PMI—would be $60,000.
Does Refinancing Make Sense?
A quick way to judge a refinance is the break-even point: divide your total closing costs by your monthly savings. In a hypothetical case with $5,000 in closing costs and $150 in monthly savings, you'd break even in about 34 months. If you expect to move or refinance again before then, the new loan may not pay off. Also consider how resetting to a new 30-year term affects the total interest you'll pay. If you're several years into your current loan, ask your partner to show the total interest under a matching or shorter term as well, so you can see the full trade-off before you commit.
How to Prepare for a Mortgage
- Check your credit reports for free at AnnualCreditReport.com and dispute any errors well before applying.
- Lower your debt-to-income ratio by paying down balances and avoiding new loans or credit cards.
- Save for more than the down payment. Budget for closing costs, moving expenses, and a cash reserve.
- Gather documents: recent pay stubs, W-2s or tax returns, bank statements, and photo ID. See documents needed for a loan.
- Avoid large unexplained deposits and keep a paper trail for any gift funds.
- Hold steady. Avoid changing jobs or making big purchases while your loan is in process.
What Mortgage Lenders Review
Mortgage underwriting is more detailed than a personal loan review. Partners typically look at four areas:
- Credit. Your score and history help determine both eligibility and your rate.
- Capacity. Your debt-to-income ratio compares your total monthly debts, including the new housing payment, with your gross monthly income.
- Capital. Savings for your down payment, closing costs, and reserves after closing.
- Collateral. The appraisal confirms the home is worth enough to support the loan.
Steady employment, typically documented over the past two years, also matters. If you're self-employed, expect to provide tax returns and possibly profit-and-loss statements. Our responsible lending page explains why we encourage borrowers to budget for the full monthly cost of ownership, not just the mortgage payment.
Need Help With Smaller Costs Too?
Moving, repairs, and furnishing a new place can add up. If you need a smaller amount, see our personal loans page, and visit how it works to learn more about our request process. Have more questions? Our FAQ covers common topics.
Start Your Home Loan Request
Whether you're buying your first home or refinancing to a better rate, Lending Buddy helps you get connected with licensed mortgage partners through one free, no-obligation request. Verify your partner on NMLS Consumer Access, compare Loan Estimates line by line, and choose the mortgage that fits your budget and goals. When you're ready, select Apply Now.
Frequently Asked Questions
Is Lending Buddy a mortgage lender?
No. Lending Buddy isn't a mortgage lender and doesn't make credit decisions. We connect you with licensed mortgage partners that offer FHA loans, conventional fixed-rate mortgages, first-time homebuyer programs, and refinancing. The partner you work with sets your rate, fees, and terms. Verify any partner's license on NMLS Consumer Access before sharing documents.
What credit score do I need for an FHA loan?
Under FHA guidelines, borrowers with a credit score of 580 or higher may qualify with a 3.5% down payment, and those with scores from 500 to 579 may qualify with 10% down. Individual lenders can set higher minimums, and your income, debts, and savings also matter when a lender makes its decision.
How much are closing costs on Lending Buddy home loans?
Closing costs are set by the mortgage partner and third parties, not by Lending Buddy. They commonly run about 2% to 5% of the loan amount and can include origination fees, appraisal, title insurance, and prepaid taxes and insurance. Your Loan Estimate lists them, so compare that form across offers before choosing.
What is the difference between PMI and MIP?
PMI is private mortgage insurance on conventional loans with less than 20% down; it can generally be canceled at 20% equity and ends automatically at 78% of the original value. MIP applies to FHA loans and includes an upfront premium plus an annual premium that often lasts the life of the loan with under 10% down.
