FHA home loans (which are insured by the Federal Housing Administration) are marketed as one of the best loan products for first-time homebuyers. Because these loans only require a low down payment of 3.5%, qualifying for an FHA home loan means you can purchase a property with less money out-of-pocket. These loans also allow a credit score as low as 500 to 580.

But while these mortgages are attractive, they aren’t perfect. Before you apply for an FHA mortgage, here’s what you should know about this program.

1. Upfront mortgage insurance premium

You’re probably aware that some mortgage programs require borrowers to pay mortgage insurance if they don’t have at least a 20% down payment. Mortgage insurance protects the bank in case of default. What you may not realize, however, is that when you apply for an FHA home loan, you’re required to pay an upfront mortgage insurance premium. This extra premium increases your total loan balance. As of 2016, the upfront mortgage insurance premium is 1.75% of the loan balance. You don’t pay this premium out-of-pocket at closing, rather your lender includes the fee in your mortgage loan.

2. Permanent mortgage insurance

While we’re on the subject of mortgage insurance, another problem with FHA home loans is that annual mortgage insurance is permanent and required for the life of the loan—unlike a conventional loan which cancels private mortgage insurance once the property has 22% equity.

In the past, annual mortgage insurance with an FHA home loan worked the same, with lenders canceling the insurance once a buyer built enough equity. This is no longer the case. If you purchase a house using an FHA home loan and you don’t have a 20% down payment, you’ll pay  mortgage insurance every month until you pay off the loan. The good news is that you can refinance to a conventional loan in the future and get rid of mortgage insurance, which could also reduce your home loan payment.

3. It’s harder to purchase a condo

FHA home loans can also be problematic if you’re looking to purchase a condominium. Condominiums are excellent properties if you want a home that doesn’t require a lot of outdoor maintenance. But unfortunately, the Federal Housing Administration will only allow a loan for a condominium if more than half of the units in the building or community are owner-occupied. Additionally, the unit you purchase must be at least 400 square feet.

4. Properties have to meet certain requirements

To get an FHA loan for a home purchase, the property must meet certain requirements and be in good condition. If you’re interested in an FHA loan because you want to buy a fixer-upper or a foreclosure, you may have problems qualifying for a standard FHA home loan if the home is in poor condition and needs a lot of work. Luckily, it’s not impossible to get FHA financing in this situation.

There is an FHA home loan program that allows buyers to finance the purchase price of a home and the cost of improvements with the same loan. If you’re thinking of buying a fixer-upper, ask your mortgage loan officer about an FHA 203K rehab loan. These loans cover bathroom and kitchen renovations, patios and decks, plumbing, flooring, new siding, HVAC systems, etc.

With interest rates at an all-time low, now’s a good time to become a homeowner or move up. There are plenty of reasons to own a piece of your American dream. Homeowners, on average, have a greater net worth than renters, plus owning can provide a sense of accomplishment. But once you begin the process of buying and speak with mortgage lenders, you might come to the realization that you can’t afford to buy a house—at least not now.

1. You haven’t saved enough money

If you’re not up-to-date with current mortgage requirements, you might be unaware that most lenders currently require a down payment for a home purchase. This wasn’t the case in the mid- to late-2000s before the housing crisis. Ten years ago you could walk into a lender’s office with zero cash and purchase with nothing out-of-pocket. Nowadays, unless you qualify for a VA home loan or a USDA home loan, you’ll need a minimum down payment between 3.5% and 5%. Regardless of whether you have an excellent credit score and sufficient income, most mortgage lenders won’t approve your application if you don’t have enough assets.

2. You have too much student debt

Another roadblock to homeownership for some borrowers is student loan debt—or any type of debt. When you apply for a home loan, the lender will look at your credit report to see how much you owe other creditors, and they’ll factor in your minimum payments for car loans, credit cards, student loans and other debts when determining whether you qualify for a mortgage.

Unfortunately, if your student loan payments take a chunk of your monthly income, this can delay a home purchase in two ways. This is because student loan payments prevent some would-be buyers from building a savings account to cover their down payment and closing costs. And secondly, student loan debt can increase a buyer’s debt-to-income ratio, making it difficult for them to qualify for a home loan. Or they might only qualify for a small amount and it becomes harder to find properties in their price range.

3. You’re a one-income household

You can certainly buy a home as a single person. But when you’re a single-income household managing bills on your own, it is harder to qualify for large mortgages. You might run into this problem if you live in an area with a higher cost-of-living.

Let’s say you make $35,000 a year, or roughly $2,900 a month before taxes. Typically, monthly mortgage payments cannot exceed 28% to 30% of your gross monthly income. Therefore, the maximum you can spend on a mortgage payment every month, including principal, interest, taxes and homeowners insurance, would be around $870. This means you can afford to spend a maximum of $120,000 to $140,000 on a home purchase, depending on your mortgage rate and term.

This isn’t an issue if there’s affordable housing in your area and a generous selection of properties within this price point. On the other hand, if it’s expensive to live in your city and starter homes begin in the low $200,000, you’ll have to postpone buying a home until your income increases.

Some mortgage experts recommend paying off a home loan early. The sooner you pay off a mortgage, the sooner you can achieve a measure of financial freedom. Plus, getting rid of a home loan early reduces how much you pay in interest over the life of the loan.

 But while a 15-year or a 20-year mortgage saves money in the long run, a 30-year mortgage might be a wiser alternative.

 You Can’t Put a Price on Flexibility

 Some people don’t like the idea of debt, so they aim to pay off their mortgages as soon as possible. This is why they choose 15-year mortgages. But even if you share this mindset, you don’t need a 15-year loan to achieve this.

 Nowadays, most mortgages don’t have prepayment penalties, which penalize borrowers for paying off their home loans before a certain period of time. Even if your loan had a prepayment penalty, your lender would only charge this penalty for the first three years of the mortgage term. Therefore, if you wanted to pay off a 30-your home loan in 5 years, 10 years or 15 years, you could do so at no additional cost.

 The truth is, a 30-year mortgage offers the best of both worlds because there’s flexibility. You can pay down your balance slowly over the next three decades, or you can make extra principal payments every month to pay off the balance sooner. With a 15-year mortgage loan, your home loan payment will be higher, and you’re obligated to make these higher payments each and every month.

 More Opportunities to Invest and Save

 A 15-year term might increase your mortgage payments by $400 or $500 each month, depending on how much you owe. This might be a drop in the bucket if you’re making good money and can afford to pay down your home loan while achieving other financial goals. But if you can only choose one option, a 30-year mortgage can make sense in your situation.

 Instead of choosing a shorter term and pouring all your money into the house, you can take advantage of a cheaper house payment that comes with a longer mortgage term. With the savings, there’s more opportunities to invest in your future. You can better prepare for retirement or increase your net worth with other investments, perhaps stocks, bonds, real estate, etc. Or if you have credit card debt or student loans, use your disposable cash to pay off these balances. Additionally, choosing a 30-year mortgage and getting a lower monthly payment helps you live life to the fullest. Are there hobbies you want to explore or places you want to visit? If you can save on your house payment every month, it’ll be easier to achieve these goals.

Getting approved for a mortgage loan isn’t as easy as getting a car loan or a credit card. Mortgage lenders don’t approve everyone for financing, and banks have their own set of strict lending guidelines. The underwriter considers your entire financial picture to determine if you’re a good candidate for a loan. And unfortunately, if the bank’s underwriter isn’t confident in your ability to repay funds, you won’t get the loan. So before you step foot inside a bank, you need to strengthen your finances in preparation for a mortgage.

1. Pay down debt

 Some people don’t realize the damaging effect credit card debt can have on a mortgage loan. Even if you make your minimum payments every month on credit cards, student loans or auto loans, lenders calculate your debt-to-income ratio to determine how much you’re able to receive for a property.

 Your total monthly debt payments including your home loan should not exceed 36% to 43% of your gross monthly income. If you have high debts, this limits how much you can borrow. And when a bank limits borrowing capacity, you’re purchasing power decreases and you’ll have to look at cheaper homes.

 To strengthen your finances, pay off as many debts as possible. This can decrease your debt-to-income ratio allowing you to qualify for a bigger mortgage.

2. Get a copy of your credit report

 Getting the best interest rate is key because a low rate saves you money on a monthly basis, and over the life of the loan. Never assume you have good credit. Order a copy of your credit report from Annualcreditreport.com or contact the credit bureaus for copies. Check your report for inaccuracies and dispute errors. Erroneous negative information on your credit file can decrease your credit score and prevent qualifying for the most favorable rates.

3. Eliminate unnecessary expenses

 Buying a home is expensive and you’ll need to put cash into the deal. Even if you can swing a mortgage payment, you might not have disposable income to save for a down payment or closing costs. Most loan programs require a down payment, so getting a mortgage might require eliminating unnecessary expenses.

 Brainstorm ways to cut back and save money. Simple adjustments can result in big savings, and these savings add up quickly. For example, clipping coupons and buying generic can shave dollars off your grocery bill. Going on a spending diet and only purchasing necessary items can also result in huge savings. Likewise, consider making sacrifices like skipping your yearly vacation. If you can save $300 a month, that’s $3,600 a year for a down payment.

4. Get a part-time job

 Minimum mortgage down payments average between 3.5% and 5%, and closing costs can run between 2% and 5% of the sale price. In addition to eliminating unnecessary expenses to save money, you can look for a part-time job. The more income you generate on a monthly basis, the quicker you can save enough money to purchase a home. If you work part-time a few hours and earn $125 a week, that’s an additional $500 a month. If you’re also able to save $300 by cutting back on expenses, that’s a total of $800 a month or $9,600 for a home purchase in just 12 months.

Your mortgage is one of your biggest investments, and likely your largest monthly expense. Naturally, you want to protect your investment in the event of your untimely death. For this reason, you might consider purchasing mortgage life insurance.

 This is a unique type of life insurance. If you die before paying off the mortgage, the insurance policy pays off your balance. If you’re the head of the household, have dependents, or if others rely on your income, this policy ensures that your loved ones have a place to call home after you’re gone.

 But although mortgage life insurance has its benefits, there are a few things to consider before purchasing a policy

1. Mortgage life insurance is expensive

 The cost of mortgage life insurance varies depending on several factors, such as your age and the amount of your mortgage. Therefore, a smoker might pay more for a policy than a non-smoker. But even if you’re young and healthy, mortgage life insurance is expensive. You’ll have to speak with an insurance agent for a quote. But to give an idea of what you might pay, a 35-year-old non-smoker could pay as much as $750 a year for a policy, which breaks down to about $60 a month. This is in addition to mortgage payments paid to the lender.

 This might not seem like a bad deal—at least not until you learn the cost of getting a term life insurance policy. Term life insurance policies are considerably cheaper. For example, a 35-year-old healthy non-smoker might get a $500,000 term life policy for as little as $20 a month. His beneficiaries receive a death benefit upon his death, which can be used to pay off the mortgage.

2. The value of mortgage life insurance decreases

 Before getting a mortgage life insurance policy, there’s something else to take into consideration. Unlike a whole or term life insurance policy—which has a level death benefit—the value of mortgage life insurance decreases as you pay down the balance. If you purchase a house for $200,000 and die five years later after paying down your balance by $25,000, your policy doesn’t pay the original balance. It only pays what you owe on the mortgage at the time of your death—in spite of the fact that you paid the same premium over the years.

3. There’s no flexibility with mortgage life insurance

 Unfortunately, mortgage life insurance doesn’t offer flexibility. These policies can only be used to pay off the mortgage balance. It cannot be used to pay off other debts or cover future expenses, such as your kid’s college education or wedding. This type of flexibility is only possible with a traditional life insurance policy. With these policies, your beneficiaries can use funds for any purpose.

 When Does Mortgage Life Insurance Make Sense

 Even though mortgage life insurance is expensive and doesn’t offer flexibility, it makes sense in certain circumstances. If you apply for a term or a whole life insurance policy, there’s often a medical underwriting process before the company approves the policy. And unfortunately, it can be difficult to get a life insurance policy if you have poor health. Medical underwriting isn’t generally required for mortgage life insurance, so this type of insurance is an option when you’re not eligible for a term or a whole life policy. It’s true that you’ll pay more for mortgage life insurance, but you’ll also have peace of mind knowing your loved ones can grieve without worrying about the home loan.

If you want to reduce your mortgage rate and monthly payment, or if you need cash for home improvements, refinancing your mortgage may seem like the solution. But although refinancing can achieve some of your goals, they are reasons to think twice before refinancing your house.

Refinancing is the process of getting a new home loan to replace an existing loan. A new mortgage with new terms can be financially rewarding, but refinancing isn’t for everyone. Here is why you should think twice before refinancing.

1. Your credit needs improving

Many people refinance with hopes of getting a lower interest rate and reducing their monthly payments. This improves cash flow, and borrowers can use extra money to pay off other debts or build their emergency savings accounts.

It’s important to realize, however, that a low interest rate isn’t a right—it’s a privilege. And unfortunately, refinancing to a lower interest rate requires a good credit score. Before you apply for a new mortgage, check your credit report and credit score to see where you stand. Depending on the lender, you’ll need a minimum credit score of 680 to 700 to qualify for the best mortgage rates. You can improve your credit by paying bills on time, disputing errors on your credit report and paying off consumer debt.

2. You’re thinking about moving

Some homeowners don’t count the cost of refinancing. Since the process creates a new mortgage loan, you’re responsible for paying closing costs. This can range from 2% to 5% of the mortgage balance. You can pay closing costs out of your own funds, or include the cost in your new mortgage balance.

The fact that refinancing involves fees shouldn’t be a deal breaker—as long as you plan to live in the home long enough to recoup these fees. It doesn’t make sense to refinance and spend thousands when you plan to move within the next year. To determine whether refinancing makes sense, divide the monthly savings after refinancing by the amount of your closing costs. If refinancing reduces your mortgage balance by $250 a month and you paid $7,000 in closing cost, you’ll need to live in the home for at least 28 months to break even.

3. Home values are declining

A cash out refinance lets you tap your equity without selling the home. In most cases, you can borrow up to 80% of your home’s value. You can use funds for debt consolidation, home improvements, business start up, college tuition, etc.

Understand, however, that a cash out refinance increases your mortgage balance and reduces your home’s equity. For that matter, you should think twice about refinance if local home values are declining. If your home value drops before you’re able to pay down your new mortgage balance, you could end up with an upside down home loan—where you owe more than the home’s worth.

4. You have a prepayment penalty

You should also think twice about refinancing if your mortgage has a prepayment penalty. Some mortgage lenders include this penalty to discourage borrowers from refinancing their homes too soon, thus allowing the bank to collect a certain amount of interest on the property.

The good news is that prepayment penalties don’t apply to every mortgage loan; and mortgage lenders can only charge the penalty for the first three years. If you refinance during this period, the penalty can be several month’s worth of interest.

Despite the fact that countless people apply for mortgages every year, the process can be overwhelming and scary. This is a major life decision, so it is normal to have questions. Some first-time homebuyers don’t know where to begin. However, starting the application process for a mortgage is easier than you think.

Here are four simple tips for beginning your application for a new mortgage.

1. Visit different lender websites

You don’t have to get a mortgage from the bank that provides your checking and savings accounts. Visit different mortgage or bank websites to explore their products. Read loan descriptions to see which programs you’re eligible for, and to learn about down payment requirements, minimum credit score requirements and limitations. This is an excellent starting point for becoming familiar with a multitude of home loan options. Once you meet with a lender, you’ll have a better idea of mortgage programs that could work for you.

2. Gather your paperwork

Don’t complete a mortgage application for the sake of completing one. Only start the  application process once you are ready to move forward with a home purchase. Before you start your application, make sure you have your paperwork together. This ensures a smoother process.

Required paperwork for a mortgage includes two years of tax returns, two months of bank statements and 30 days of paycheck stubs. If you have a short sale, foreclosure or bankruptcy in your past, make sure you’re eligible to apply for a mortgage. Typically, you have to wait at least 24 months after a bankruptcy discharge, short sale or foreclosure to apply for a home loan.

3. Fill out an online pre-qualification form

After choosing a mortgage program, you can begin the process by completing an online pre-qualification form. This is a preliminary step and an excellent way to learn whether you meet basic qualifications for a home loan. You’ll state your desired home loan amount and your income on the form. The bank conducts a brief credit check, and based on this information, determines whether you pre-qualify for a home loan. A pre-qualification means there’s a good chance that you’re eligible, but there are no guarantees until you complete a formal application.

4. Complete a formal application

After you’re pre-qualified, the lender(s) you speak with can provide a Loan Estimate that explains the terms you can expect to receive. This includes your qualifying amount, interest rate, estimated closing costs and estimated monthly payment. This form also estimates the cash you’ll need to close.

The Loan Estimate is designed to remove any guesswork so you know exactly what you’re getting into. You can get a Loan Estimate from multiple lenders to compare home loans. Once you make side-by-side comparisons, notify the chosen lender of your intent to proceed with the home, and then complete an official mortgage application.

The information in the Loan Estimate can change before closing. This is because interest rates fluctuate on a day-to-day basis, so the rate you’re initially quoted might be higher or lower by the time you’re ready to close.

It takes about 30 to 45 days to complete the mortgage process. Three days before your scheduled closing date, you’ll receive a mortgage Closing Disclosure form which explains your final loan terms. Compare the Closing Disclosure with your original Loan Estimate and contact your lender if you have any questions.

There are plenty of online resources and tools to help you count the cost of buying a house. A home purchase is a major decision and one of the largest investments you’ll make. Some people fear getting in over their heads. With a purchase of this magnitude, there’s the risk of being house poor. A bank will look at your income to determine your pre-approval amount. But sometimes, lenders pre-approve applicants for more than they can afford, so you have to use discernment.

The good news is that an online mortgage calculator can help you decide a comfortable amount to spend on a property, as well as provide information about mortgage costs. Here are four ways to utilize a mortgage calculator when shopping for a home loan.

1. Estimate mortgage payment

A mortgage calculator takes three variables into consideration: sale price, mortgage term and interest rate. This is an excellent tool for estimating your mortgage payment. If you are familiar with average prices of homes in your area, but not sure if you can afford to purchase within this range, a mortgage calculator provides a rough estimate of what you can expect to pay.

Simply plug in different sale prices and provide additional information, such as the term, down payment and interest rate. Some mortgage calculators are more advanced than others and include estimates for property taxes, homeowner’s insurance and private mortgage insurance. Be aware, however, that some calculators do not provide this information, and only calculate principal and interest payments.

There’s no way to know with certainly the interest rate you’ll pay until you’re ready to close on a mortgage. But for the purpose of using a mortgage calculator, you can estimate your interest rate based on your credit score. A quick online search can provide information on average mortgage and refinance rates. With this information, you can play around with the numbers to see what your mortgage payment may look like at different price points. Based on the results, you can determine a reasonable amount to spend on a property.

2. Compare 15-year vs 30-year mortgage

A 15-year mortgage typically results in a lower interest rate, plus you can pay off the home faster and build equity sooner. But since you’re slashing your mortgage term in half, you’ll pay more on a monthly basis.

With the help of a mortgage calculator, you can compare mortgage payments based on a variety of terms, and then choose a term that works with your budget. After comparing multiple terms, you might realize a shorter mortgage term is more affordable than you thought. This feature of a mortgage calculator is particularly helpful if you’re refinancing your home loan and you don’t want to reset the clock with a 30-year term.

3. Calculate interest

Some mortgage calculators include an amortization table that breaks down principal and interest payments over the term. If you can’t decide between a 30-year and a 15-year mortgage, this feature lets you compare the cost difference of both options. An amortization table is also useful for comparing the cost of a biweekly mortgage with a traditional monthly payment. A biweekly mortgage involves paying half your mortgage every two weeks. This results in one extra payment a year and reduces your mortgage term by six or seven years.

4. Extra payment calculator

If you want to pay off your home loan sooner, but don’t want to commit to a biweekly mortgage, some mortgage calculators include an advanced feature designed to help you pay off your mortgage faster. Based on your current balance and a target payoff date, these calculators determine how much you would have to pay extra every month to pay off the home loan early. Some calculators even let you decide the amount of extra payments. You’ll see how different payment amounts affect your payoff date, and you’ll learn how much interest you can save by making extra principal payments.

A 30-year mortgage is a favored product for many homebuyers. And since these mortgages offer comfortable, affordable mortgage payments, many lenders recommend this type of loan. But you shouldn’t select a 30-year mortgage simply because a lender dangles it in your face.

It’s crucial to have an in-depth dialogue with your loan officer and familiarize yourself with various products. After a little research, you may come to the realization that another mortgage program is a better fit for your situation.

Here are three possible alternatives to a 30-year mortgage.

1. Three, Five or Seven-year ARM

A 30-year fixed-rate mortgage might be appropriate if you’ll live in the house long-term, and if you’re looking for a reasonable monthly payment and an interest rate that doesn’t change. But if you know you’ll sell the house within three, five or seven years, talk with your lender to see if you’re a candidate for an adjustable-rate mortgage.

ARMs aren’t the right fit for everyone. A hallmark feature of these mortgages is the temporary fixed rate followed by periodic rate adjustments. Many fear and keep away from adjustable-rate mortgages because of their unpredictable nature. But if you rarely live in one place for too long, or if you relocate often for work, an adjustable-rate mortgage can make sense. These mortgages have cheaper interest rates than fixed-rate mortgages. With that being the case, you can live in the house for a few years, benefit from a low mortgage payment, and then sell the house before your rate adjustments begin.

2. 15-Year Mortgage

A 15-year mortgage results in a higher mortgage payment, so this loan isn’t right for everyone. But if you can afford a higher payment, and you like the idea of paying off your home sooner and building equity faster, ask your mortgage officer to crunch the numbers and learn whether you can fit a 15-year (or even a 20-year) mortgage into your budget.

A 15-year mortgage might be ideal if you’re retiring in the next 10 to 15 years and you don’t want to drag a mortgage payment into retirement.

3. 40-Year Mortgage

These mortgages aren’t as common as they were in the mid-2000s, but they are making a comeback. Not every lender offers this mortgage. However, if you find a lender willing to give borrowers 40-year financing, one benefit of these loans is that you can get into an affordable  house sooner. But since you’re extending your mortgage 10 years beyond what’s considered a normal term, you’ll also build equity much slower. If home values fall before you can significantly pay down the balance, it might be difficult to sell the property.

While a 40-year mortgage can be the key to a more affordable payment, you should make every effort to pay off the house sooner, which can help you build equity and reduce your interest charges. For example, gradually increase your mortgage payment as your income allows.

Getting your mortgage from an online-only lender is one way to get a lower interest rate. These lenders don’t have brick-and-mortar locations, and less overhead means they can afford to offer their customers cheaper rates. This can result in a less expensive monthly payment for you, and you’ll pay less interest for your house. Some online lenders also streamline the process, making it simpler and faster. But before you apply for a mortgage online, there’s a few things you should know.

1.Do your research

It doesn’t matter if an online mortgage company has several commercials or a fancy website, do your research and read reviews to make sure you’re working with a trustworthy company.

It can be hard to distinguish a good mortgage company from a bad one. Reading online reviews is a good start, plus you can check with the Better Business Bureau to see if the company has received any complaints. If you have friends or relatives who’ve recently used an online mortgage company for a purchase or refinance, get recommendations. If they had a positive experience with their mortgage company, you may have a similar experience.

2.Go beyond the pre-qualification

When you visit an online lender’s website, you’re prompted to complete a pre-qualification form. You’ll provide “stated” information about your income, debt and credit health. Based on this information, the company determines whether you’re a desirable candidate. But getting pre-qualified for a mortgage doesn’t guarantee a mortgage approval.

The pre-qualification is the first step. For a better idea of whether you’re eligible, you need to provide the lender with supporting documentation. This includes your most recent tax returns for the past two years, two to three month’s of bank statements and your recent paycheck stub. The underwriter will then review your credit history and issue a formal pre-approval letter if you meet the qualifications.

3.Research products offered by different banks

Online mortgage lenders offer a variety of lending products, so you’re sure to find what you’re looking for. Just about every bank will have a selection of popular products such as an FHA home loan, a conventional home loan and a VA home loan. But some mortgage lenders also have specialty products.

For example, in addition to a 3/1 or a 5/1 ARM, you might find an online lender that offers a 10/1 adjustable-rate mortgage, which lets you enjoy a fixed rate for the first 10 years, and then your rate resets every 10 years. Or you might stumble upon a lender that offers zero down home loans to non-VA and non-USDA eligible applicants, providing these people have excellent credit.

4.Compare interest rates

Not only should you compare different online mortgage lenders to find the right product, you should also shop around and get free no-obligation quotes from different lenders to compare interest rates. Since interest rates vary from lender to lender, plan to speak with at least two or three banks before making a decision. If you only contact one lender, you could end up paying more for your mortgage than necessary.