Qualifying for a mortgage involves more than just your credit score. Lenders look at your overall financial picture to determine which loan programs may be available and how much you may be able to borrow.

Depending on the loan program, the review may include your:

Credit history and credit score
Income and employment
Monthly debts and obligations
Debt-to-income ratio (DTI)
Assets and available funds
Down payment and cash to close
Financial reserves
Property type and occupancy
Loan amount and loan-to-value (LTV)

Your Credit Score Is Only One Part of the Picture

A higher credit score may provide access to more loan options or more favorable pricing, but there isn't one credit score requirement that applies to every mortgage.

FHA, VA, USDA, conventional, jumbo, investment, and specialty loan programs can have different credit requirements. Other factors in the loan application may also affect qualification.

Income & Employment

Lenders need to determine that you have sufficient, stable, and eligible income to repay the mortgage. How income is documented can vary depending on how you earn it and the loan program you choose.

Income may come from sources such as:

Salary or hourly employment
Overtime, bonuses, or commissions
Self-employment
1099 or contract income
Retirement or pension income
Social Security income
Rental income
Investment or other eligible income

Self-employed borrowers and borrowers with nontraditional income may also have options such as bank statement, 1099, profit-and-loss, asset-based, or other specialty loan programs.

Debt-to-Income Ratio (DTI)

Your debt-to-income ratio compares certain monthly debt obligations with your gross monthly income.

Lenders may consider obligations such as:

Mortgage or proposed housing payment
Auto loans
Credit card payments
Student loans
Personal loans
Alimony or child support when applicable
Other recurring debts reported or required to be considered

There isn't one DTI limit that applies to every borrower. The acceptable ratio can vary based on the loan program, credit profile, assets, reserves, and other factors.

Assets, Down Payment & Cash to Close

Lenders may also verify that you have sufficient funds for the transaction. Depending on the loan, these funds may include:

Down payment
Closing costs
Prepaid taxes and insurance
Required reserves
Earnest money deposit
Other transaction expenses

Eligible funds may come from checking or savings accounts, investments, retirement accounts, proceeds from another property, and—in certain loan programs—gift funds or other approved sources.

Financial Reserves

Reserves are funds you have remaining after closing. Some mortgage programs may require borrowers to have a certain amount of money available after the transaction is completed.

Reserve requirements can vary depending on the loan program, property type, number of financed properties, occupancy, and overall borrower profile.

Examples of assets that may be considered for reserves include:

Checking and savings accounts
Investment accounts
Certain retirement accounts
Other eligible liquid or documented assets

Property Type & Occupancy

The property you're financing can affect which mortgage programs are available.

Lenders may consider whether the property will be your:

Primary Residence
Second Home
Investment Property

The type of property also matters. Financing guidelines may differ for:

Single-family homes
Condominiums
Townhomes
2–4 unit properties
Manufactured homes
Non-warrantable condominiums
Condotels
Other unique properties

This is one reason it's important to discuss the property with your loan professional before assuming a particular loan program will work.

Loan-to-Value (LTV)

Loan-to-value, or LTV, compares the amount of the mortgage with the value of the property.

For a purchase, the calculation is generally based on the applicable property value used by the loan program. For a refinance, it compares the new loan amount with the property's value.

LTV can affect:

Down payment requirements
Mortgage insurance
Interest rate and loan pricing
Available loan programs
Cash-out options
Underwriting requirements

Every Loan Program Is Different

There is no single set of qualification requirements that applies to every mortgage.

A borrower who doesn't fit the guidelines for one program may have other options. That's why it's helpful to look at the complete financial picture rather than focusing on only one factor such as credit score or DTI.

How to Prepare Before Applying

A little preparation can help make the mortgage process smoother and may help identify potential issues before you're ready to make an offer or refinance.

Before applying, consider:

Reviewing your credit for errors or unexpected accounts
Avoiding new credit or large purchases when possible
Gathering recent income and employment documentation
Organizing bank and asset statements
Keeping records of large deposits or transfers
Avoiding unnecessary movement of funds between accounts
Knowing approximately how much you have available for your down payment and closing costs
Discussing employment, income, or credit changes with your loan professional
Keeping financial documents readily available throughout the loan process

Important: Don't assume you need to pay off debts, close accounts, or make major changes to your finances before applying. A change that seems helpful could affect your mortgage qualification. It's best to discuss your situation with your loan professional first.

Not Sure If You Qualify?

You don't need to have perfect credit, a large down payment, or a traditional financial profile to start the conversation.

With conventional, FHA, VA, USDA, jumbo, investment, manufactured home, and alternative lending programs available, there may be more than one way to structure your financing.

Let's Review Your Options

A prequalification can help you understand:

Your estimated purchasing power
Loan programs that may fit your situation
Potential down payment requirements
Estimated monthly housing expenses
Credit or qualification issues to address
Documents that may be needed
Your next steps toward financing

GET PREQUALIFIED

CONTACT GIDGET

Prequalification is based on preliminary information and is not a commitment to lend. Final loan approval is subject to credit approval, verification of income and assets, acceptable property, underwriting requirements, and applicable loan program guidelines.

Closing Costs

Once the blank page is created, start with this:

Understanding the Cost of Getting a Mortgage

When purchasing or refinancing a home, the amount you need at closing can include more than your down payment. There may be lender fees, third-party charges, prepaid expenses, and other costs associated with completing the mortgage and real estate transaction.

Understanding these expenses early can help you plan ahead and avoid surprises at closing.

Closing Costs vs. Cash to Close

These terms sound similar, but they don't mean exactly the same thing.

Closing Costs are the fees and expenses associated with obtaining the mortgage and completing the transaction.

Cash to Close is the final amount you may need to bring to closing after accounting for items such as your down payment, closing costs, deposits already paid, lender or seller credits, and other applicable adjustments.

What May Be Included in Closing Costs?

Closing costs vary depending on the loan program, property, lender, location, and transaction. They may include several different types of expenses.

Lender & Loan Charges

These are costs associated with obtaining and processing the mortgage and may include:

Origination or lender fees
Processing or underwriting fees
Discount points, if applicable
Credit report or verification fees
Other loan-related charges

Appraisal & Property-Related Costs

Depending on the loan and property, you may see charges for:

Property appraisal
Final inspection or reinspection, if required
Flood determination
Survey, when required
Pest or other inspections when applicable

Some inspections are paid directly by the borrower outside of closing and may not appear as a closing cost.

Title & Settlement Charges

These costs are associated with transferring ownership and closing the transaction and may include:

Title search
Title insurance
Settlement or closing services
Recording fees
Other title-related charges

Who pays certain title and settlement expenses can vary by contract, local custom, and the type of transaction.

Government & Recording Charges

Depending on the transaction and location, there may also be:

Recording fees
Transfer or documentary taxes
Mortgage-related taxes or fees
Other state or local government charges

Prepaid Expenses & Escrow Funds

Some of the money collected at closing isn't actually a lender fee. It may be money collected in advance for future property expenses.

This can include:

Homeowners insurance premium
Property taxes
Prepaid mortgage interest
Initial escrow deposits for taxes and insurance
Flood insurance, when required

Can Closing Costs Be Reduced or Paid by Someone Else?

Depending on the loan program and transaction, there may be several ways to help manage the amount you need at closing.

Seller Credits

In a purchase transaction, the seller may agree to contribute toward certain allowable closing costs.

Seller contributions are subject to the purchase contract and the limits and requirements of the particular loan program.

Lender Credits

A lender credit may be available to help offset certain closing costs. In exchange, the borrower will generally accept a higher interest rate than they would receive without the credit.

It's important to compare the upfront savings with the potential long-term cost of the higher rate.

Interested-Party Contributions

Certain parties involved in a real estate transaction may be permitted to contribute toward allowable costs. The amount and types of expenses that can be paid are subject to the applicable loan program's guidelines.

Gift Funds

Some loan programs allow eligible gift funds to be used toward a borrower's down payment, closing costs, or other permitted expenses.

The donor and documentation requirements vary by loan program.

Financing Certain Costs

In some refinance transactions, eligible closing costs may be included in the new loan balance, subject to available equity, loan-to-value limits, and program requirements.

Certain loan programs may also permit specific upfront fees or funding charges to be financed rather than paid in cash at closing.

Your Loan Estimate Helps You Plan

After you apply for a mortgage, you'll receive a Loan Estimate (LE) that provides important information about the proposed loan, including:

Loan amount and interest rate
Estimated monthly payment
Estimated closing costs
Prepaid expenses
Estimated cash to close
Other important loan terms

As the loan progresses, some amounts may change as services are completed and final figures become available.

Before closing, you'll receive a Closing Disclosure (CD) showing the final loan terms and closing figures.

Can Closing Costs Be Reduced or Paid by Someone Else?

Depending on the loan program and transaction, there may be several ways to help manage the amount you need at closing.

Seller Credits

In a purchase transaction, the seller may agree to contribute toward certain allowable closing costs.

Seller contributions are subject to the purchase contract and the limits and requirements of the particular loan program.

Lender Credits

A lender credit may be available to help offset certain closing costs. In exchange, the borrower will generally accept a higher interest rate than they would receive without the credit.

It's important to compare the upfront savings with the potential long-term cost of the higher rate.

Interested-Party Contributions

Gift Funds

Some loan programs allow eligible gift funds to be used toward a borrower's down payment, closing costs, or other permitted expenses.

The donor and documentation requirements vary by loan program.

Financing Certain Costs

In some refinance transactions, eligible closing costs may be included in the new loan balance, subject to available equity, loan-to-value limits, and program requirements.

Certain loan programs may also permit specific upfront fees or funding charges to be financed rather than paid in cash at closing.

Your Loan Estimate Helps You Plan

After you apply for a mortgage, you'll receive a Loan Estimate (LE) that provides important information about the proposed loan, including:

Loan amount and interest rate
Estimated monthly payment
Estimated closing costs
Prepaid expenses
Estimated cash to close
Other important loan terms

As the loan progresses, some amounts may change as services are completed and final figures become available.

Before closing, you'll receive a Closing Disclosure (CD) showing the final loan terms and closing figures.

How Much Should I Budget for Closing Costs?

There isn't one percentage that accurately predicts closing costs for every mortgage. The total can vary based on the loan amount, loan program, property location, insurance, taxes, title charges, interest rate, and other factors.

That's why I prefer to review the actual estimated costs for your particular transaction rather than relying on a general rule of thumb.

Why Can Closing Costs Change?

Some costs are known early in the process, while others may change as additional information becomes available.

Changes may result from:

Final property taxes and assessments
Homeowners or flood insurance premiums
Title and settlement charges
Appraisal or inspection requirements
Interest rate or loan pricing changes
Changes to the loan amount
Changes to the closing date
Seller, lender, or other allowable credits
Final prepaid interest and escrow calculations

Your Loan Estimate and Closing Disclosure help you see how the numbers develop as you move toward closing.

Let's Review the Numbers Before You Make a Decision

When comparing mortgage options, don't look at the interest rate alone.

I can help you review the rate, monthly payment, closing costs, cash to close, and overall loan structure so you have a clearer picture of what the financing may actually cost.

GET PREQUALIFIED

CONTACT GIDGET

Closing costs and cash-to-close amounts vary by transaction, property, loan program, lender requirements, insurance, taxes, and other factors. Estimates are subject to change as additional information becomes available.

Page updated

Google Sites

Report abuse