Frequently Asked Questions

Down payment requirements vary significantly by loan type:

• FHA Loans: As little as 3.5% down (or 10% with credit scores 500-579)
• VA Loans: 0% down for eligible veterans and active military
• USDA Loans: 0% down for eligible rural properties
• Conventional Loans: 3% - 20% down (3% for first-time buyers, 5% minimum for investment properties)
• Jumbo Loans: Typically 10% - 20% minimum

Pro Tip: While 20% down avoids PMI (Private Mortgage Insurance) on conventional loans, many buyers purchase with less. First-time buyers may also qualify for down payment assistance programs. Contact us to explore all your options.

Pre-Qualification:

• Informal estimate based on self-reported information
• Takes 5-10 minutes
• No credit check or documentation required
• Not binding or verified
• Good for initial planning only

Pre-Approval:

• Formal commitment from a lender
• Requires credit check, income verification, and asset documentation
• Takes 1-3 business days
• Provides specific loan amount you're approved for
• Required for serious home shopping
• Gives you negotiating power with sellers

Bottom Line: Always get pre-approved before making offers. Sellers take pre-approved buyers seriously. Start your pre-approval now →

Lenders use several calculations to determine affordability:

1. Debt-to-Income Ratio (DTI):

• Front-end ratio: Housing costs should be ≤ 28% of gross monthly income
• Back-end ratio: Total monthly debts should be ≤ 43-50% of gross income (varies by loan type)

2. Quick Rule of Thumb: You can typically afford a home that's 2.5 to 3 times your annual household income.

Example: If you earn $80,000/year, you could potentially afford a $200,000-$240,000 home.

However, consider:

• Property taxes and insurance
• HOA fees (if applicable)
• Maintenance costs (1-2% of home value annually)
• Your lifestyle and other financial goals

Use our mortgage calculator to run personalized scenarios, or call us at (651) 552-3681 for a detailed affordability analysis.

Ideal Timeline:

6-12 months before buying:

• Check your credit score and start improving it if needed
• Begin saving for down payment and closing costs
• Pay down high-interest debts
• Avoid major purchases or new credit accounts

3-6 months before:

• Get pre-qualified to understand your budget
• Research loan types and programs
• Organize financial documents

1-2 months before house hunting:

• Get pre-approved (required before making offers)
• Lock in your team (realtor, mortgage broker)
• Start actively shopping

Already found your dream home? Don't worry! We can fast-track your pre-approval in 24-48 hours. Contact us immediately →

FHA Loans (Federal Housing Administration):

• Down payment: As low as 3.5%
• Credit score: Minimum 580 (500 with 10% down)
• Best for: First-time buyers, lower credit scores
• Requires mortgage insurance (MIP) for life of loan if less than 10% down
• Loan limits apply by county

VA Loans (Veterans Affairs):

• Down payment: 0% (100% financing)
• Credit score: Typically 620+ (varies by lender)
• Best for: Veterans, active military, eligible spouses
• No PMI required
• Funding fee applies (can be financed)
• Must have Certificate of Eligibility (COE)

Conventional Loans:

• Down payment: 3% - 20%
• Credit score: Typically 620-640 minimum
• Best for: Good credit, stable income, larger down payments
• PMI required if less than 20% down (removable once you reach 20% equity)
• More flexible property types
• Conforming loan limits ($766,550 in most areas for 2024)

Learn more about each loan type →

Jumbo Loans are mortgages that exceed conforming loan limits set by Fannie Mae and Freddie Mac.

2024 Conforming Limits:

• Most areas: $766,550
• High-cost areas: Up to $1,149,825
• Any loan above these limits = Jumbo

Jumbo Loan Requirements:

• Higher credit scores (typically 700+)
• Larger down payments (10-20%)
• More cash reserves (6-12 months of payments)
• Lower debt-to-income ratios
• Full documentation of income and assets

Advantages:

• Finance luxury homes
• Competitive rates (sometimes better than conforming)
• No PMI with 20% down

Looking at homes over $766,550? Learn about our jumbo loan programs →

Fixed-Rate Mortgages:

• Interest rate never changes
• Consistent monthly principal & interest payment
• Common terms: 30-year, 20-year, 15-year
• Best for: Long-term homeownership, budget certainty, rising rate environments
• Protection from rate increases

Adjustable-Rate Mortgages (ARMs):

• Lower initial interest rate (typically 0.5-1% lower than fixed)
• Rate adjusts after initial period (5/1, 7/1, 10/1 ARMs)
• Rate caps limit how much rate can increase
• Best for: Short-term ownership (5-7 years), expecting income to increase, falling rate environments
• Lower initial payments = more purchasing power

Example: A 7/1 ARM has a fixed rate for 7 years, then adjusts annually for the remaining 23 years.

Which is right for you? It depends on your plans. Call us at (651) 552-3681 to compare options based on your situation.

Yes! Investment property loans have different requirements:

Down Payment:

• Minimum 15-25% (higher than primary residence)
• 20% avoids PMI

Credit & Income:

• Higher credit score required (typically 680+)
• Lower debt-to-income allowed
• More cash reserves needed (6+ months)
• May be able to use rental income to qualify

Rates:

• Typically 0.5-0.75% higher than primary residence

DSCR Loans (Debt Service Coverage Ratio): Alternative option for investors with multiple properties or self-employment. Qualification based on property cash flow, not personal income.

Building a rental portfolio? Learn about DSCR loans → or schedule a consultation.

Closing costs typically range from 2-5% of the loan amount and cover various fees to complete your home purchase.

Typical Closing Costs Include:

Lender Fees:

• Origination fee (0.5-1% of loan)
• Underwriting fee ($400-$900)
• Processing fee ($300-$700)
• Application fee ($0-$500)

Third-Party Fees:

• Appraisal ($400-$800)
• Title insurance ($1,000-$4,000)
• Title search ($200-$400)
• Home inspection ($300-$600)
• Survey ($300-$500)
• Recording fees ($100-$300)

Prepaid Items:

• Homeowners insurance (1 year prepaid)
• Property taxes (2-6 months)
• Prepaid interest (depends on closing date)

Escrow Setup:

• Initial escrow deposit for taxes & insurance

Example for $300,000 home:

• Low estimate: $6,000 (2%)
• High estimate: $15,000 (5%)
• Average: $9,000-$12,000 (3-4%)

Ways to Reduce Closing Costs:

• Negotiate seller concessions (seller pays part of closing costs)
• Lender credits (higher rate, lender pays costs)
• Shop for third-party services
• Close at end of month (less prepaid interest)

Get a detailed cost estimate →

Discount Points let you "buy down" your interest rate by paying upfront fees. 1 point = 1% of loan amount and typically reduces your rate by ~0.25%.

Example on $300,000 loan:

• No points: 6.50% rate = $1,896/month
• 1 point ($3,000): 6.25% rate = $1,847/month
• Monthly savings: $49
• Break-even: $3,000 ÷ $49 = 61 months (5 years)

When Points Make Sense:

• You plan to stay in the home longer than break-even period
• You have extra cash available
• You want lowest possible monthly payment
• You're in a high tax bracket (points are tax-deductible)

When to Skip Points:

• You might move or refinance within 5 years
• Cash is tight for closing costs
• Rates are expected to drop (refinance opportunity)

Pro Tip: We can calculate exact break-even points and run scenarios for your specific situation. Call (651) 552-3681 for a personalized analysis.

Mortgage rates are influenced by both market factors and personal factors.

Market Factors (beyond your control):

• Federal Reserve policy & interest rates
• 10-year Treasury bond yields
• Economic indicators (inflation, employment)
• Housing market conditions
• Global economic events

Personal Factors (you can control):

• Credit Score: Higher scores = lower rates (740+ gets best rates)
• Down Payment: More down = lower rate (20%+ is ideal)
• Loan Type: Conventional typically lower than FHA/VA
• Loan Term: 15-year lower than 30-year
• Debt-to-Income Ratio: Lower DTI = better rate
• Property Type: Primary residence gets best rates
• Loan Amount: Jumbo loans may have different rates
• Rate Lock Period: Shorter lock = better rate

Rate Lock: Once you lock your rate, it's guaranteed for 30-60 days regardless of market changes. Lock when you're comfortable with the rate and have found a home.

View today's rates → or get a personalized quote.

PMI (Private Mortgage Insurance) protects the lender if you default on your loan. Required on conventional loans with less than 20% down payment.

PMI Cost: Typically 0.3% - 1.5% of loan amount annually

• $300,000 loan = $900 - $4,500/year ($75-$375/month)

Ways to Avoid PMI:

1. Put 20% Down: Traditional way to avoid PMI

2. Piggyback Loan (80-10-10):

• First mortgage: 80% of value
• Second mortgage (HELOC): 10%
• Your down payment: 10%
• No PMI, but two mortgages to manage

3. Lender-Paid PMI:

• Slightly higher interest rate instead of PMI
• May be tax-deductible (PMI isn't always)

4. VA Loans: Never require PMI (for eligible veterans)

Removing PMI:

• Automatic removal at 78% loan-to-value
• Request removal at 80% LTV with good payment history
• Refinance once you have 20% equity

FHA MIP Note: FHA loans require mortgage insurance for life of loan if you put less than 10% down. This is different from PMI and can only be removed by refinancing to conventional.

Want to explore PMI-free options? Let's discuss your strategy →

Typical Timelines:

Purchase Loans: 30-45 days

• Week 1-2: Application, processing, appraisal ordered
• Week 2-3: Appraisal completed, underwriting begins
• Week 3-4: Conditional approval, final conditions cleared
• Week 4-6: Clear to close, final walkthrough, closing day

Refinance: 30-45 days

• Similar process but no purchase contract
• 3-day rescission period after closing (federal law)

Cash-Out Refinance: 30-50 days

• Slightly longer due to additional documentation

Express/Fast-Track Closings: 14-21 days

• Possible with proper preparation
• All documents ready upfront
• Waived appraisal (if eligible)
• Strong credit and straightforward income

Factors That Affect Timeline:

• Appraisal scheduling (biggest variable)
• Title work complexity
• Document submission speed
• Underwriter workload
• Loan complexity (self-employed, multiple properties)
• Issues discovered during process

How to Speed Things Up:

• Submit complete application immediately
• Respond to requests within 24 hours
• Keep your finances stable (no major changes)
• Don't make large purchases
• Stay in close contact with your loan officer

Need to close quickly? Call us at (651) 552-3681 - we specialize in fast closings!

Essential Documents Checklist:

Income Verification:

• Last 2 years W-2s
• Last 2 years tax returns (all pages with schedules)
• Last 30 days pay stubs
• Year-to-date profit & loss if self-employed
• Business tax returns if you own 25%+ of a company

Asset Documentation:

• Last 2 months bank statements (all pages, all accounts)
• Last 2 months investment account statements
• Retirement account statements (if using for down payment)
• Gift letter (if receiving gift funds)

Identity & Residency:

• Driver's license or state ID
• Social Security card
• Proof of current address

Property Information:

• Purchase contract (if buying)
• Property insurance quote
• HOA documents (if applicable)

Additional for Specific Situations:

If You've Had Credit Issues:

• Bankruptcy discharge papers
• Foreclosure deed
• Letter of explanation for derogatory credit

If Divorced:

• Divorce decree
• Separation agreement
• Child support documentation

If Receiving Alimony/Child Support:

• Divorce decree showing amount
• Proof of 6+ months continuous receipt

If Military/Veteran (VA Loan):

• Certificate of Eligibility (COE)
• DD-214 (discharge papers)

Pro Tips:

• Provide complete statements (don't skip pages)
• Documents should be recent (within 60-90 days)
• Keep originals available if needed
• Explain any large deposits or unusual transactions

Start your application → Our secure portal makes document upload easy!

Underwriting is when a lender verifies all your information and makes the final decision to approve your loan.

What Underwriters Review:

The 3 C's:

1. Capacity (Ability to Repay):

• Employment history and stability
• Income verification and calculation
• Debt-to-income ratios
• Cash reserves

2. Credit (Willingness to Repay):

• Credit score and history
• Payment patterns
• Derogatory items explanation
• Recent credit inquiries

3. Collateral (Property Value):

• Appraisal review
• Title search results
• Property condition
• Marketability

Typical Underwriting Process:

Initial Review (1-3 days):

• File completeness check
• Automated underwriting system (AUS) decision
• Request for additional documentation

Conditional Approval (3-5 days):

• Manual review by underwriter
• Conditions issued (items needed)
• Borrower submits conditions

Final Approval (1-2 days):

• All conditions satisfied
• "Clear to Close" issued
• Final disclosures sent

Common Conditions Requested:

• Letter of explanation for credit inquiries
• Proof of large deposits
• Updated pay stubs
• Updated bank statements
• Verification of employment (VOE)
• Proof of gift funds
• Homeowners insurance proof

Red Flags Underwriters Look For:

• Recent job changes
• Large unexplained deposits
• New credit accounts
• Undisclosed debts
• Income discrepancies
• Low appraisal

What NOT to Do During Underwriting:

• ❌ Change jobs or become self-employed
• ❌ Make large purchases (car, furniture)
• ❌ Open new credit accounts
• ❌ Close credit card accounts
• ❌ Make large deposits without documentation
• ❌ Co-sign for anyone
• ❌ Pay off collections without approval

Questions about underwriting? We guide you through every step - call (651) 552-3681

Closing Day Overview:

Before Closing Day:

• Receive Closing Disclosure 3 business days before closing
• Review all numbers carefully
• Arrange for closing funds (wire transfer or cashier's check)
• Schedule final walk-through (usually day before or morning of closing)
• Bring valid photo ID (driver's license)

Who Attends Closing:

• You (and co-borrowers)
• Closing agent/title company representative
• Sometimes: Real estate agents, attorney (varies by state)
• Your loan officer may attend or be available by phone

Documents You'll Sign:

• Promissory Note (your promise to repay)
• Mortgage/Deed of Trust (lien on property)
• Closing Disclosure (final settlement statement)
• Initial Escrow Account Disclosure
• Deed (transfer of property ownership)
• Various disclosures and affidavits

What to Bring:

• ✅ Valid government-issued photo ID
• ✅ Cashier's check or wire confirmation for closing costs
• ✅ Proof of homeowners insurance
• ✅ Any last-minute documents requested

How Long It Takes:

• Typical closing: 45-90 minutes
• More signers or complex deals: up to 2 hours

After Signing:

Purchase:

• You typically get keys same day
• Deed recorded with county
• Funds disbursed to seller

Refinance:

• 3-day rescission period (federal law)
• Can cancel anytime during 3 days
• Funds available after 3 days

Common Closing Day Questions:

• Q: Can numbers change? Minor changes possible, but you'll be notified
• Q: Can I negotiate at closing? Too late - negotiate before signing
• Q: What if I find problems during walkthrough? Address with seller before closing
• Q: Do I need an attorney? Depends on state; some require, some don't

First-Time Buyer Tip: Don't be intimidated by the paperwork! Your closing agent will explain each document. Take your time and ask questions.

We'll prepare you thoroughly for closing day! Let's get started →

Minimum Credit Scores by Loan Type:

FHA Loans:

• 580+ for 3.5% down payment
• 500-579 for 10% down payment
• Most flexible for lower scores

VA Loans:

• No official minimum, but most lenders require 620+
• Some lenders accept 580+
• Strong compensating factors can offset lower scores

Conventional Loans:

• 620 minimum (most lenders)
• 640+ for better rates
• 680+ for investment properties
• 740+ for best rates and terms

USDA Loans:

• 640+ typically required

Jumbo Loans:

• 700+ minimum
• 720+ preferred

How Credit Score Affects Your Rate:

• 760-850: Best rates available
• 700-759: Excellent rates
• 680-699: Good rates
• 660-679: Fair rates
• 620-659: Higher rates, limited options
• Below 620: FHA or specialist lenders only

Score Difference Impact Example:

• 760 score: 6.25% rate
• 680 score: 6.75% rate
• On $300,000 loan = $100+/month difference

How to Improve Your Score Before Applying:

• Pay all bills on time (most important factor)
• Pay down credit card balances below 30% utilization
• Don't close old credit cards
• Dispute any errors on credit report
• Avoid new credit inquiries
• Become authorized user on established account

Timeline: Most improvements take 30-90 days to reflect on your score.

Not sure of your score? We offer free credit analysis and improvement strategies →

Absolutely! Self-employed borrowers qualify every day, but documentation requirements are different.

Traditional Self-Employed Requirements:

Income Documentation:

• 2 years personal tax returns (all pages + schedules)
• 2 years business tax returns (if incorporated)
• Current year profit & loss statement
• Current year balance sheet
• Business license and/or articles of incorporation

Income Calculation:

• 2-year average of net income (after deductions)
• Add back: depreciation, depletion, one-time losses
• Subtract: one-time gains
• Declining income trend = problem
• Increasing trend = good!

The Write-Off Challenge:

The more you write off for taxes, the less income you show for mortgage qualification. You may need to plan 1-2 years ahead by reducing write-offs.

Alternative: Bank Statement Loans

For self-employed borrowers who can't qualify traditionally:

• Use 12-24 months bank statements instead of tax returns
• Income calculated from deposits
• Higher rates (typically 1-2% higher)
• Larger down payments required (10-20%)
• Good for: High earners with lots of write-offs

Additional Self-Employed Considerations:

• Need to show 2 years in same line of work
• Business must show consistent profit
• May need to prove business continuity/stability
• Industry licensing may be verified
• Large cash reserves help strengthen application

Best Practices:

• Work with CPA to strategize tax returns
• Keep personal and business finances separate
• Maintain detailed financial records
• Build strong cash reserves
• Consider timing (apply after strong tax year)

Self-employed? We specialize in self-employed mortgages - call (651) 552-3681 to maximize your qualifying income!

Yes, you can still qualify! But waiting periods and requirements vary.

Bankruptcy Waiting Periods:

Chapter 7 Bankruptcy:

• FHA/VA: 2 years from discharge with re-established credit
• Conventional: 4 years from discharge
• Exceptions possible with extenuating circumstances (medical, job loss)

Chapter 13 Bankruptcy:

• FHA/VA: 1 year of payment plan with court approval
• Conventional: 2 years of payment plan (4 years from discharge)
• Must have perfect payment history

Foreclosure Waiting Periods:

• FHA: 3 years
• VA: 2 years
• Conventional: 7 years (3 years with extenuating circumstances)
• USDA: 3 years

Short Sale/Deed-in-Lieu:

• FHA: 3 years
• VA: 2 years
• Conventional: 4 years (2 with extenuating circumstances)

What Counts as "Extenuating Circumstances":

• Serious illness/injury
• Death of wage earner
• Divorce
• Job loss (documented, not for cause)

Requirements After Waiting Period:

• Re-established credit (3-4 tradelines)
• Perfect payment history since bankruptcy/foreclosure
• Stable employment and income
• Written explanation of circumstances
• Proof situation has been remedied

Rebuilding Credit After Bankruptcy/Foreclosure:

Year 1:

• Get secured credit card
• Become authorized user on someone's established account
• Pay all bills on time (set up auto-pay)

Year 2:

• Apply for second credit card
• Consider credit-builder loan
• Keep balances below 30% utilization

Year 3+:

• Continue perfect payment history
• Build emergency savings
• Save for down payment
• Work with mortgage professional to prepare

Other Credit Issues:

• Late Payments: Explain if older than 12 months; may need letter of explanation
• Collections: May need to be paid or payment plan established
• Charge-offs: Generally must be paid for conventional loans
• Judgments/Tax Liens: Must be paid or payment plan before closing

Had credit problems? Let's create a roadmap to homeownership → We specialize in credit repair strategies!

Debt-to-Income (DTI) Ratio is one of the most important factors in mortgage approval.

What Is DTI?

Your total monthly debt payments divided by your gross monthly income.

Two Types of DTI:

Front-End DTI (Housing Ratio):

• Only housing costs ÷ gross income
• Includes: Principal, interest, taxes, insurance, HOA (PITIA)
• Ideal: ≤ 28%

Back-End DTI (Total Debt Ratio):

• ALL monthly debts ÷ gross income
• Includes: PITIA + car loans + student loans + credit cards + personal loans + child support + alimony
• This is the one lenders care most about

DTI Limits by Loan Type:

• Conventional: Max 43-50% (depends on credit score and down payment)
• FHA: Max 43-50% (manual underwriting may allow higher)
• VA: No official max, but 41% guideline (can go higher with residual income)
• USDA: Max 41%
• Jumbo: Max 43% typically (prefer 36%)

Example Calculation:

Gross monthly income: $6,000

Monthly debts:

• Proposed mortgage payment (PITIA): $1,500
• Car loan: $400
• Student loan: $250
• Credit cards minimum: $100
• Total: $2,250

DTI = $2,250 ÷ $6,000 = 37.5% ✅ (Good!)

What Counts as Debt:

• ✅ Auto loans/leases
• ✅ Student loans (even if deferred - typically 0.5-1% of balance)
• ✅ Credit card minimum payments
• ✅ Personal loans
• ✅ Child support/alimony paid
• ✅ Other mortgages/rental properties
• ❌ Utilities
• ❌ Insurance (except mortgage insurance)
• ❌ Groceries
• ❌ Phone bill

How to Improve Your DTI:

Reduce Debt (Best Option):

• Pay off credit cards
• Pay off car loan
• Pay down student loans
• Don't close accounts - just pay down

Increase Income:

• Add co-borrower
• Include bonus/commission (if 2-year history)
• Include part-time job (if 2-year history)
• Include rental income (with proper documentation)

Strategic Approaches:

• Pay off debt with less than 10 months remaining (may not count)
• Refinance car to lower payment
• Have someone else take over debt (with proper documentation)

High DTI Strategies:

• Larger down payment
• Higher credit score
• Significant cash reserves
• Consider FHA or VA (more flexible)

Concerned about your DTI? Use our affordability calculator or call us for a free DTI analysis at (651) 552-3681