What is a debt-to-income (DTI) ratio and why does it matter?
Percentage of monthly income that goes toward debt payments. Lenders use it to assess a buyer’s ability to repay. Most conforming loans require a DTI below ~43%.
What’s the typical minimum credit score required for a conventional loan & how much should you put down?
Around 620 (with 3–5% to put down.
What’s the typical minimum credit score required for FHA Loans?
Allow scores as low as 580 (with 3.5% down).
How much is the minimum down payment for common loan types?
Conventional: 3–5% minimum
FHA: 3.5% minimum
VA and USDA: 0% (for eligible buyers)
What is PMI and when is it required?
Private Mortgage Insurance; required on conventional loans with less than 20% down to protect lenders if the borrower defaults.
Why do some buyers still choose a higher down payment even if they qualify for less?
Larger down payments lower monthly payments, reduce interest paid over time, and can eliminate PMI.
What’s the advantage of using a builder’s preferred lender?
Buyers may receive incentives like closing cost credits, reduced interest rates, or free upgrades, but only if they finance through that lender.
What are closing costs and how much do they typically run?
Fees paid at closing for loan origination, appraisal, title, taxes, insurance, etc. Typically 2–5% of the purchase price.
What is an earnest money deposit?
A good-faith deposit buyers submit with an offer to show commitment. It’s usually 1–3% of the purchase price and applied toward closing.
What is the most common loan type?
Conventional Loan
Best for buyers with good credit (typically 620+).
Which loan type is best for buyers with good credit?
Conventional Loan
How do Self-Employed / 1099 Contractors prove income?
- 2 years of tax returns.
- Year-to-date profit & loss (P&L) statement.
- Bank statements (sometimes 12–24 months for bank statement loans).
How do Retired / Fixed-Income Buyers prove income?
- Social Security award letter.
- Pension/retirement account statements.
- Investment account proof (if drawing regular income).
What are Other Income Sources?
- Alimony/Child Support → Must be documented with a court order and proof of receipt for the last 6–12 months.
- Rental Income → Lease agreements + tax returns showing reported income.
What’s the difference between a fixed-rate and adjustable-rate mortgage (ARM)?
Fixed-rate means the interest stays the same for the life of the loan. ARMs start with a lower rate but adjust after a set period, which can mean higher payments later.
Should I pay off my debts before applying for a mortgage?
Reducing debt can improve your DTI ratio and credit score, which helps approval and lowers interest rates. But draining all savings may hurt your ability to cover closing costs and emergencies.
Can I use gift money for my down payment?
Yes, many loan programs allow gift funds from family. Lenders usually require a signed letter verifying it’s a gift, not a loan.
What’s included in my monthly mortgage payment?
Typically PITI: Principal, Interest, Taxes, and Insurance. Sometimes HOA fees and PMI are also included.
How long does the loan process take?
Generally 30–45 days from contract to closing, though some builders with preferred lenders can close faster.
What’s the difference between pre-qualification, pre-approval, and final approval?
Pre-qualification: Estimate based on self-reported info.
Pre-approval: Lender-verified with credit check and documents.
Final approval: Underwriter signs off once appraisal, title, and all docs are cleared.
What programs exist for first-time buyers?
FHA, state/local down-payment assistance, VA/USDA (for eligible buyers), and sometimes lender-specific programs with reduced rates or lower insurance costs.
