The Ultimate Real Estate Q&A:

PMI, or Private Mortgage Insurance, is a monthly fee added to your mortgage payment when your down payment is less than 20% of the home's purchase price. It protects the lender — not you — in case you stop making payments.

PMI typically costs between 0.5% and 1.5% of your loan amount per year, divided into monthly payments. For example, on a $400,000 loan, you could pay $150–$500 per month in PMI on top of your regular mortgage payment.

Good news: PMI is not permanent. Once you've paid your loan balance down to 80% of the home's original value, you can request to have it removed.

An Earnest Money Deposit is a check you write when your offer on a home is accepted. It's essentially a good-faith payment that shows the seller you're serious about buying the property.

In Texas, EMD is typically 1% of the purchase price, though it can be higher in competitive situations. The money is held in escrow by a title company and is applied toward your down payment or closing costs at closing — it's not an extra cost.

Important: If you back out of the deal without a valid contractual reason, you may lose your earnest money. That's why protecting your contract contingencies (inspection, financing, appraisal) matters.

These are two separate payments, but the earnest money gets credited toward the total amount you owe at closing.

Earnest Money Deposit (EMD): Paid upfront when your offer is accepted — usually within 3 business days. It goes into escrow immediately.

Down Payment: The larger lump sum you pay at closing, typically 3.5%–20%+ of the purchase price depending on your loan type. Your EMD is counted as part of this payment — so you're not paying both separately.

Example: $350,000 home, 5% down = $17,500 due at closing. If your EMD was $3,500, you'd bring $14,000 to closing (plus any closing costs).

Closing costs are fees and expenses you pay to finalize your home purchase. They're separate from your down payment and cover services like title insurance, the appraisal, loan origination, attorney fees, prepaid homeowner's insurance, and property tax escrow setup.

As a buyer, expect to pay roughly 2%–4% of the purchase price in closing costs. On a $350,000 home, that's approximately $7,000–$14,000.

Pro tip: Your lender is required to give you a Loan Estimate within 3 days of your application that breaks down all expected closing costs so there are no surprises.

Yes — this is called a "seller concession" or "seller-paid closing costs," and it's a common negotiating tool. Instead of asking the seller to drop their price, you can ask them to contribute a set dollar amount toward your closing costs.

For example, you might offer full price on a $350,000 home but request $8,000 in seller concessions. The seller nets slightly less, but you walk away needing less cash out of pocket at closing.

Most loan programs cap how much a seller can contribute — typically 3%–6% of the purchase price depending on your loan type and down payment.

Strategy: In a buyer's market or on a home that's been sitting, seller concessions are a powerful negotiating tool that keeps more cash in your pocket.

These are two completely separate costs you'll pay when buying a home — and understanding both is critical for budgeting.

Down Payment: The percentage of the home's purchase price you pay out of pocket. The rest is financed through your mortgage. This builds your immediate equity in the home.

Closing Costs: Fees paid to third parties (lender, title company, government) to process and finalize the loan and transfer ownership. This money does not go toward the home's purchase price — it's the cost of doing the transaction.

Bottom line: When budgeting, plan for both. A buyer putting 5% down on a $350,000 home should budget roughly $17,500 for the down payment plus $7,000–$12,000 in closing costs.

PMI kicks in when your loan amount exceeds 80% of the home's value (called Loan-to-Value or LTV). There are a few ways to avoid it or eliminate it:

Put 20% down: The cleanest way to avoid PMI entirely from day one.

Use a Piggyback Loan (80/10/10): Take out a primary mortgage for 80%, a second loan for 10%, and put 10% down — no PMI required.

VA Loans: If you're a qualifying veteran or active-duty military, VA loans have no PMI requirement regardless of down payment.

Wait it out: If you put less than 20% down, PMI typically falls off automatically once your loan balance reaches 78% LTV, or you can request removal at 80% LTV with proof of value.

Note: FHA loans have a similar charge called MIP (Mortgage Insurance Premium), but it works differently — it often stays for the life of the loan unless you refinance.

Loan-to-Value (LTV) is a percentage that compares how much you're borrowing to what the home is worth. It's one of the most important numbers in your mortgage.

Formula: Loan Amount ÷ Appraised Value = LTV

If you buy a $400,000 home with a $40,000 down payment (10%), your loan is $360,000. Your LTV is 90%.

LTV directly affects your interest rate, whether you pay PMI, and what loan programs you qualify for. Lower LTV = less risk to the lender = better rates for you.

Target: Getting to 80% LTV (or below) either at purchase or over time eliminates PMI and typically earns you better loan terms.

These two numbers are often confused but they measure different things.

Interest Rate: The base rate charged by the lender on the money you borrow. This is what determines your monthly principal and interest payment.

APR (Annual Percentage Rate): A broader measure that includes the interest rate plus lender fees (origination fees, discount points, etc.), expressed as a yearly rate. It reflects the true annual cost of borrowing.

APR is always equal to or higher than the interest rate. When comparing loan offers, compare APRs — not just rates — for an apples-to-apples comparison.

Example: Loan A: 6.75% rate / 7.1% APR vs. Loan B: 6.875% rate / 6.95% APR — Loan B may actually cost less over time despite the slightly higher rate.

An appraisal is a professional valuation of the home you're buying, conducted by a licensed appraiser. Its purpose is to confirm that the home is worth what you're agreeing to pay for it.

Your lender orders the appraisal — you don't choose the appraiser. You will pay for it, typically $450–$750, and it's usually due within a few days of going under contract.

The appraiser visits the property, evaluates its condition, size, features, and location, then compares it against recently sold similar homes (called "comps") to arrive at a market value.

Timeline: Appraisals typically take 1–2 weeks to complete. The report is delivered to your lender and shared with you.

A low appraisal means the appraiser valued the home below the agreed purchase price. Since lenders will only finance up to the appraised value, this creates a gap that needs to be resolved.

You typically have four options:

1. Renegotiate: Ask the seller to lower the price to the appraised value.

2. Pay the difference: Cover the gap in cash out of pocket (called an "appraisal gap").

3. Meet in the middle: Seller drops price partway and buyer covers the rest.

4. Walk away: If your contract includes an appraisal contingency, you can exit without losing your earnest money.

In competitive markets: Some buyers waive the appraisal contingency or offer to cover an appraisal gap up to a certain amount to strengthen their offer — a strategy that carries risk and should be discussed with your agent.

With a traditional mortgage (conventional, FHA, or VA loan), the typical closing timeline is 30–45 days from the date your offer is accepted.

This timeline allows time for the loan to be fully underwritten, the appraisal to be completed, title to be cleared, inspections to be done, and all documents to be reviewed and signed.

Cash purchases can close much faster — sometimes in 2 weeks or less — since there's no lender involved.

Things that can delay closing: Appraisal issues, title problems, lender conditions not being met quickly, or last-minute credit changes. Stay in close communication with your lender and don't make any major financial moves (new credit, large purchases) during this period.

Yes — but it's different from negotiating on a resale home. Builders rarely reduce their base price because it affects the value of other homes in the community. However, there's often more flexibility than buyers realize.

What you can negotiate with builders:

✓ Closing cost contributions (builders often offer thousands toward closing costs, especially when using their preferred lender)

✓ Free or discounted upgrades (appliances, flooring, countertops)

✓ Rate buydowns through the builder's lender

✓ Lot premiums waived or reduced

Key tip: Always bring your own buyer's agent to the first builder visit — even if the builder has an on-site agent. The on-site agent represents the builder, not you. Having your own representation costs you nothing and protects your interests.

In almost every case, buying a spec home (a completed or nearly-completed home the builder has already built) offers a better deal than building a custom home from the ground up.

Why spec homes win: The builder has already absorbed the construction cost and wants to move inventory. You can often negotiate on price, closing costs, or rate incentives — and you close in weeks, not months.

Why building from scratch costs more: When you pick a lot and design a home from the ground up, every upgrade is priced at a premium. Buyers routinely add $50,000–$150,000+ to the base price through selections and upgrades before they realize what's happened. You're also locked in for 6–12 months with no flexibility.

Best value play: A spec home or a resale home that's been sitting on the market — these sellers are motivated and you have real negotiating power. New construction to-be-built is exciting, but the final cost almost always surprises buyers.

Your first mortgage payment is typically due on the 1st of the month that falls approximately 30–60 days after your closing date — not the month immediately following closing.

Here's why: Mortgage interest is paid in arrears (you pay last month's interest this month). At closing, you prepay the interest for the remaining days of the current month. Then your first full payment covers the following month.

Example: If you close on March 15th, you prepay interest for March 16–31 at closing. Your first full payment is then due May 1st — not April 1st.

Heads up: Many new homeowners are caught off guard thinking they have a full 2 months before any payment is due. Confirm the exact due date with your lender after closing and set up autopay right away.