Mortgage FAQ: Answers for Every Stage of Homeownership

Get plain-English answers to the mortgage questions borrowers ask most — from choosing between an FHA, VA, or conventional loan to comparing today’s purchase and refinance rates. This page pulls together the top questions across every loanDepot product, reviewed by our licensed loan officers and updated for 2026. 

Table of Contents

loanDepot Lending Process

A mortgage is one of the biggest commitments you’ll make, and loanDepot is built to be your partner through all of it. We match you with a loan that suits your specific needs, not the one that pays us more.
 
We move quickly when it counts, with home equity loans closing in as few as five days. And because buying, refinancing and home equity solutions are all under one roof, loanDepot can support every chapter of homeownership. Plus, with the Lifetime Guarantee, you’ll pay $0 in lender and appraisal fees on eligible future refinances, helping you save each time you return.

There is no cost or obligation to check your options or to get started. If you choose to move forward and apply for a loan with us, there may be a small application and / or appraisal fee required, depending on the product you select.

loanDepot is a licensed mortgage lender in all 50 states, so we can work with you whether you’re buying, refinancing, or relocating across state lines. A few home equity products have state-by-state availability, and Texas follows its own loan structure, so your loan officer will confirm exactly what’s available where you live.

Buying a House

Escrow is a third-party account that holds money or documents until the conditions of a transaction are met. In homebuying, you’ll encounter escrow in two places: at the purchase, where an escrow company holds your earnest money and the seller’s deed until closing; and after closing, where your mortgage lender uses an escrow account to collect and pay your property taxes and homeowners insurance for you, bundled into your monthly payment.

The purchase escrow opens when your offer is accepted and closes when the deal does. The ongoing escrow opens at closing and stays with your mortgage. Each month, in addition to principal and interest, you pay one-twelfth of your annual property taxes and one-twelfth of your homeowners insurance into the account, and your lender pays those bills on your behalf when they come due. Escrow accounts are optional on conventional loans with 20% or more down, required on FHA, VA, and most conventional loans with PMI (Private Mortgage Insurance).

Earnest money is a deposit you make when you submit an offer on a home to show the seller you’re committed to going through with the purchase. It typically runs 1% to 3% of the purchase price, though in competitive markets it can climb to 5% or higher.

The deposit sits in a neutral escrow account, not in the seller’s pocket, until either the deal closes or the contract ends. If you back out for a reason listed in your purchase contract (a failed inspection, an appraisal that comes in low, financing falling through within the contingency window), you get the money back. If you back out for a reason not in the contract (cold feet, finding a different home), the seller can keep it. Knowing the contingencies in your contract is the difference between getting your money back

You don’t legally need one, but many buyers use one. Agents handle the parts of the process that are hard to learn on the fly: pricing comparisons, contract negotiation, contingency strategy, paperwork, and coordination with the title company, inspector, and lender.

Cost is the other reason many buyers use an agent. The seller traditionally pays the buyer’s agent’s commission out of the sale proceeds, so the agent representing you doesn’t come out of your pocket in many transactions, though this is shifting and some markets now have buyers paying their own agent directly.

If you skip the agent (called buying “For Sale By Owner” when the seller also skips theirs), you take on the work yourself: writing offers, scheduling inspections, reading the title commitment, and negotiating with the seller. Some buyers do this comfortably; many find the agent’s experience pays for itself in negotiation, which is where deals are usually won or lost.

Closing costs typically run 2% to 5% of your loan amount. They cover a mix of lender fees (origination, underwriting, processing), third-party services (appraisal, title insurance, escrow, credit report), and prepaid items (property taxes, homeowners insurance, the first month of interest, mortgage insurance if applicable).
 
In many cases, the buyer pays closing costs directly, but there are options: negotiate seller credits to cover part of them, roll them into your loan amount on some loan types, or shop the third-party services for a better rate. Some loan types and first-time-buyer programs also include closing-cost assistance. You’ll see the exact numbers twice: a federally-required Loan Estimate within three business days of submitting your application that itemizes every cost line by line, and a Closing Disclosure at least three days before closing that confirms the final numbers.

PMI, or private mortgage insurance, is a monthly fee added to your mortgage payment when your down payment on a conventional loan is less than 20%. It protects the lender if you stop making payments. Cost typically ranges from 0.3% to 1.5% of the original loan amount per year, depending on your credit score, down payment, and loan type. On a $400,000 loan, that’s roughly $100 to $500 a month added to your payment.

PMI doesn’t last forever. On most conventional loans, you can request to drop it once your equity reaches 20% of the home’s original value, and lenders are required to remove it automatically at 22%. You can avoid PMI altogether by putting 20% down, choosing a loan type that doesn’t require it (VA loans skip PMI entirely; FHA loans carry a different version called MIP that has its own removal rules), or pursuing a lender-paid PMI structure where the cost is built into your rate instead of your payment. VA loans require a VA funding fee that may be financed into the loan or paid out of pocket at closing.

Purchase Mortgage Rates

A mortgage rate is the interest charged on your home loan. It helps determine your monthly mortgage payment and the total amount of interest you’ll pay over the life of the loan.

A mortgage rate lock helps protect your interest rate from market changes while your loan is being processed. The right time to lock depends on your situation, loan timeline, and current market conditions. Your loan officer can help you decide when locking your rate makes the most sense.

Your mortgage rate is influenced by factors such as market conditions, your credit profile, loan amount, down payment, property type, and the loan program you choose. A loan officer can help you understand which factors may affect your available rate options.

Qualifying for a purchase mortgage typically depends on factors such as your credit profile, income, employment history, debt obligations, and available funds for a down payment and closing costs. Loan requirements can vary by program and borrower situation.

The best mortgage rate for you depends on factors such as your credit profile, down payment, loan type, and current market conditions. Maintaining strong credit, managing debt responsibly, and exploring your loan options with a loan officer may help you access more competitive rates.

Home Equity & HELOC

Common ways to access your home equity include a cash-out refinance, home equity line of credit (HELOC) or home equity loan. Each option has different qualification requirements, costs, and repayment terms.

The cheapest option depends on your situation. For veterans, VA Cash-Out Refinance could be a great option. For non-veterans with a high first-mortgage rate, a Cash-Out Refinance could be a good option. For non-veterans with a low first-mortgage rate, a HELOC or Home Equity Loan is an option that allows you to preserve your existing rate.

The amount of cash you may be able to access depends on your home’s value, existing mortgage balance, equity, credit profile, income and other factors. A HELOC is typically measured by combined loan-to-value (CLTV), which includes your existing mortgage and the new line of credit. loanDepot HELOCs may be available up to 90% CLTV. 

A cash-out refinance may be worth considering if you want one new mortgage payment or if your current mortgage rate is higher than the available rate on a new loan. A HELOC may allow you to keep your lower existing first-mortgage rate while accessing funds through a separate loan. Compare rates, fees, monthly payments and repayment terms to determine which option may fit your situation.

No. You can access home equity without refinancing your first mortgage through a HELOC or a home equity loan. Both are second-lien products that leave your existing mortgage in place. Cash-out refinance replaces your existing mortgage entirely.

Some home equity products require a minimum 620 FICO score, with 740+ typically needed for the best rates. 

Yes. Most homeowners tap equity while still making payments on their current mortgage. HELOCs, home equity loans allow qualified borrowers to access equity while an existing mortgage remains on the property.

Interest on home equity products may be tax-deductible when funds are used to buy, build, or substantially improve the home securing the loan. Interest used for personal expenses, debt consolidation, or other purposes is generally not deductible. Consult a qualified tax professional regarding your individual circumstances.

Funding timelines vary by product and depend on factors such as underwriting, appraisal, documentation, verification requirements and closing conditions. Your loan team can provide an estimated timeline based on your specific application and loan type.

A loanDepot Home Equity Line of Credit (HELOC) lets you borrow from the equity you’ve built in your home with a line of credit of up to $750,000. You can use the full line of credit for home improvements, debt consolidation, major expenses, and more, with your choice of a 10, 15, 20, or 30 year repayment term. As you repay your balance, those funds become available to borrow again during the draw period, giving you flexible access to cash.

All three options let you use the equity you’ve built in your home, but they work differently. A HELOC gives you access to a line of credit that you can borrow from as needed. A cash-out refinance replaces your current mortgage with a new loan and provides cash at closing. A home equity loan gives you a lump sum with fixed payments over a set term. The best option depends on your financial goals, how you want to access your funds, and whether you want to keep your existing mortgage.

A loanDepot HELOC has two main costs: the closing costs paid when your line opens, and the interest you pay on your balance over the life of the loan.

The main closing cost is an origination fee, which varies based on the rate you select and is deducted from your initial draw; the exact fee is disclosed during the rate-check process. loanDepot’s HELOC requires no appraisal for most borrowers, which removes one of the largest closing-cost line items you’d face on a cash-out refinance.

Once your line is open, you can use the funds for almost anything. Common uses include home renovations (such as kitchen and bath remodels, ADUs, and repairs), debt consolidation (particularly for replacing high-rate unsecured debt with lower-rate home-secured borrowing), education expenses (such as tuition, room and board, and graduate-program costs), and major life expenses like medical bills and weddings.

Qualifying for a loanDepot HELOC typically depends on factors such as the amount of equity you have in your home, your credit profile, income, debt obligations, and property type. We offer HELOCs on primary residences, second homes, and certain investment properties, and documentation may be required to verify your financial information. Available loan amounts and eligibility requirements can vary based on your individual circumstances.

Cash-Out Refinance

A cash-out refinance allows you to convert a portion of your home’s equity into cash. Depending on the transaction structure, the funds can be used for things like home improvements, debt consolidation, or other expenses. The amount available is based on your home’s value, existing loan obligations, and lender requirements.

  • Both products access home equity, but they do it differently, and the right choice depends on your situation.
  • A cash-out refinance replaces your existing first mortgage with a new, larger one, a new rate, and pays you the difference in cash at closing.
  • A HELOC (home equity line of credit) adds a second lien on top of your existing first mortgage, without a change in your current first-mortgage rate. After closing, you have a second lien secured by the property while allowing you to keep your existing first mortgage.

The cost of a cash-out refinance can vary depending on the loan, property, and other factors. A loan officer can help you understand the costs involved and determine whether a cash-out refinance may be a good fit for your financial goals.

To qualify for a cash-out refinance with loanDepot, we consider factors such as your home equity, credit history, income, and overall financial profile. A loan officer can help you understand your options and determine whether a cash-out refinance may be a good fit for your needs.

A cash-out refinance can be a useful option for homeowners who want to access their home equity for goals such as home improvements, debt consolidation, or other major expenses. Whether it’s a good fit depends on factors like your financial goals, current mortgage, available equity, and overall financial situation.

5X5 HELOC

The 5×5 HELOC is a home equity line of credit offered by loanDepot. “5×5” refers to the customer experience — a 5-minute online application and funding in as few as 5 business days. The line is available from $25,000 to $750,000 with terms of 10, 15, 20, or 30 years

You choose a repayment term of 10, 15, 20, or 30 years at application, and each term has a matching additional-draw period. During your draw period you can take additional draws of $500 or more up to 100% of your credit limit as you pay down the balance.

As you pay down your initial balance, you can take additional draws of at least $500 up to 100% of your original credit limit during the draw period. No new hard credit pull is performed, and there is a 6-business-day wait period after a payment before that credit becomes available for redraw.

Loan amounts range from $25,000 to $750,000 (maximum $750,000 per borrower), subject to credit, combined loan-to-value (CLTV), and property type. Owner-occupied primary residences can qualify for up to 85% CLTV, secondary properties up to 80% CLTV in 1st-lien or 70% in 2nd-lien position, and 3rd-lien properties up to 70% CLTV. Maximum debt-to-income is 50%. Not available in Texas or New York for secondary and investment properties.

The minimum FICO is 600 for primary residences and 680 for secondary or investment properties. Your credit score, lien position, occupancy, and loan amount together determine the maximum loan amount and CLTV you qualify. Not available in Texas or New York for secondary and investment properties.

Yes — origination fees range from 1.50% to 4.99% and are rolled into the total loan amount, so there are no out-of-pocket costs at closing. A higher origination fee reduces your APR and monthly payment but increases the total line size. In states with an origination-fee cap below the standard range (IN, LA, ME, NC, RI, TN, VT, WA), the fee is capped at the state’s limit.

There are no prepayment penalties and no annual fees on loanDepot’s 5×5 HELOC. However, if a borrower pays back 90% or more of the loan within 16 weeks of closing, an early-payoff clawback provision may apply. You also get a 0.25% rate discount for enrolling in autopay, and the entire loan (including the origination fee) is funded with no out-of-pocket costs.

Eligible property types include single-family residences, townhomes, planned unit developments (PUDs), condominiums, duplexes, and 3–4 unit properties, in primary, secondary, and investment (non-owner-occupied) occupancies. Properties must be seasoned at least 90 days from purchase. Ineligible property types include co-ops, manufactured housing, mixed-use, properties over 20 acres (10 acres in Texas), reverse-mortgaged homes, log homes, and land-trust-owned properties. Not available in Texas or New York for secondary and investment properties.

Home Equity Loan

A Home Equity Loan allows you to borrow against the equity you’ve built in your home and receive the funds as a lump sum. You’ll repay the loan through fixed monthly payments over a set term while keeping your current first mortgage rate in place. 

All three options let you access your home’s equity, but they work differently. A Home Equity Loan provides a lump sum with a fixed interest rate and predictable monthly payments. A HELOC provides access to a revolving line of credit that can be used as needed. A cash-out refinance replaces your current mortgage with a new loan and provides cash at closing. The right option depends on your goals, how you want to access your funds, and whether keeping your current mortgage rate is important to you. Your loan officer can compare these options with you and help you decide the right loan to meet your needs.

Closing costs can vary based on factors such as loan amount, property characteristics, and the loan terms selected. Your loan officer can provide a personalized quote based on your financial situation and borrowing needs. 

Homeowners commonly use Home Equity Loans for home improvements, debt consolidation, education expenses, unexpected medical bills, major purchases, and other large financial needs. A Home Equity Loan provides a lump sum of cash that can be used to help achieve a variety of personal and financial goals. 

Qualification typically depends on factors such as the amount of equity available in your home, your credit history, income, debt obligations, and property eligibility. Loan amounts, terms, and available options may vary based on your individual financial profile. 

Refinancing Your Mortgage

A mortgage refinance replaces your current home loan with a new one. Homeowners may refinance to lower their monthly payment, change their loan term, access home equity, or pursue a different interest rate.

Refinancing may be worth considering if it helps you achieve a financial goal, such as lowering your monthly payment, changing your loan term, accessing home equity, or moving from an adjustable-rate mortgage to a fixed-rate mortgage. A loan officer can help you compare your options and determine whether refinancing makes sense for your situation.

The amount of equity needed to refinance depends on the loan program and your financial profile. In general, having more equity can provide access to more refinancing options and may help you qualify for better loan terms.

Refinancing typically requires a credit check, which may have a temporary impact on your credit score. 

When you refinance, your existing escrow account is generally closed and any remaining balance is refunded to you. A new escrow account may be established as part of your new loan, depending on your loan terms and preferences.

Rate and Term Refinance

A rate and term refinance is essentially a new mortgage with a new interest rate, a new term, or both, while your principal balance generally stays the same. It is often used to lower monthly payments or, alternatively, to build equity faster.  

A rate and term refinance changes your interest rate, your loan terms, or both, using your existing loan balance. A cash-out refinance increases your loan balance because a portion of the refinanced loan is given to you as cash when the loan funds. The amount you receive is based on your home’s equity. 

Your loan officer will provide you with an itemized Loan Estimate that provides a complete breakdown of all of the costs associated with the loan refinance. These can include appraisal, title and recording fees as well as escrow-related charges.

The refinance process timing can vary based on factors such as documentation requirements, appraisal needs, and underwriting review. Your Loan Officer can discuss the process and the requirements specific to your situation.

Yes. FHA borrowers are eligible for rate and term refinances.

Yes. One of the most common uses of a rate and term refinance is to replace an adjustable-rate mortgage for a fixed-rate mortgage.  

You may. Your Loan Officer can advise what you will need based on the type of refinance loan you desire. 

You can use our handy break-even calculator or you can calculate it by dividing your total closing costs by your expected monthly savings. For example, $9,000 in closing costs divided by $300 in monthly savings yields a breakeven point of 30 months. If you plan to be in the home beyond that timeframe, a refinance may justify the expense.

Yes. A rate and term refinance enables you to make this change. To note, a shorter loan term will most likely increase your monthly payment, but it also can reduce the amount of interest paid over the life of the loan, if you keep the loan for the full term. Consider your budget and financial goals before selecting a shorter term.

VA Loans

Most members of the regular military, veterans, reservists and National Guard may be eligible to apply for a VA loan. Additionally, spouses of military members who died while on active duty or as the result of a service-connected disability may also apply. 

A loanDepot loan consultant and the VA Eligibility Center can provide more information for your specific eligibility. After you establish eligibility, you will need to apply for a Certificate of Eligibility (COE) through the U.S. Department of Veterans Affairs website.

Like conventional loans, VA loans are issued by private lenders, but they’re insured by the government. VA loans could be a better option than conventional or FHA mortgages for  eligible Veterans, active military and reservists who have earned access to this benefit through their service to our country. These government-backed loans come with significant benefits that help Veterans purchase with zero down payment and competitive VA mortgage rates. 

 Conventional loans feature no government guarantees and adhere to the standards and requirements of government-sponsored enterprises Fannie Mae and Freddie Mac. Unlike the no down payment feature of the VA loan, these enterprises require conventional borrowers to put at least 3 percent down toward the purchase of the new home. Additionally, conventional loans with a down payment of less than 20 percent require private mortgage insurance that the borrower must purchase, which the VA loan requirements do not impose. VA loans do require a VA funding fee that may be financed into the loan or paid out of pocket at closing.

As with other government-insured home loans, the VA has specific property requirements. VA home loans can be used for:

  • 1-4 unit residential homes
  • VA-approved condominiums
  • Construction of a new or existing home
  • Manufactured homes

It’s important to note that eligible borrowers may only use VA loans for their primary residence. You cannot finance an investment property or vacation home with a VA loan.

Eligible Veterans and service members can also explore these VA loan options: 

  • VA cash-out refinance: If you are looking to pay off credit cards, consolidate debt, finance home improvements or pay off personal expenses, a VA cash-out refinance may be an excellent option. 
  • VA renovation loan: Use your VA benefits to roll the cost of your home renovations into your VA mortgage all in one loan. 
  • Interest Rate Reduction Refinance Loan (IRRRL): The Interest Rate Reduction Refinance loan enables existing VA loan holders the opportunity to get a lower interest rate. If you select this loan, you will refinance your current VA loan into another VA loan. 

FHA Loans

An FHA loan is a government-backed mortgage issued by FHA-approved lenders like loanDepot and insured by the Federal Housing Administration under HUD. 

Borrowers who meet FHA and lender qualification requirements may be eligible, subject to credit, income, property, and underwriting review.

FHA loans may be available to borrowers with credit scores as low as 520. Borrowers with credit scores between 520 and 579 may be required to make a larger down payment. Additional qualification requirements apply, and a loan officer can help determine what options may be available to you.

The minimum down payment is typically 3.5% for borrowers with credit scores of 580 or higher. Borrowers with credit scores between 520 and 579 may be required to make a 10% down payment.

The right choice depends on your financial situation and homeownership goals. Your loan officer can help go over all your options and find a loan that suits your specific needs.

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