Frequently Asked Questions

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Step 1: Determine the maximum monthly mortgage payment you don’t want to exceed. You know this figure better than anyone else, don’t worry about averages, or what anyone else is paying, the maximum monthly mortgage payment is a figure specific to you. 

Think about how much you’re paying for rent. If your rent went up tomorrow, how much could it increase to where you wouldn’t pass out, that’s your max monthly mortgage payment threshold.

Your lender will take that figure and determine the max price to not exceed your max payment. 

Step 2: Know your MORTGAGE FICO scores. Credit Karma, Identity IQ, Credit Wise, Smart Credit, TransUnion, Equifax, Experian, whoever you bank with, whatever credit card provider you have, are NOT showing you mortgage ficos. There are many more, essentially any credit monitoring service (except for one), bank, or credit card provider WILL NOT provide all 3 mortgage FICOs. 

You can pay Myfico.com monthly to see all three mortgage ficos (I wouldn’t), or simply have a lender pull your credit. 

Mortgage FICOs are FICOs 2 (Experian), FICO 4 (TransUnion), and FICO 5 (Equifax). Lenders DO NOT average your scores. Lenders take the lowest middle score. If there are multiple borrowers, lenders will take the lowest middle score of the multiple borrowers. 

Step 3: Get pre-approved, NOT pre-qualified, there’s a difference. A pre-approval means a lender pulled your credit, reviewed all of your income and assets (down payment and closing costs), and calculated your DTI (debt-to-income ratio – see question 4), and then issues a pre-approval in writing. 

Step 4. Once pre-approved, go house hunting with your Realtor, get your offer accepted, open escrow, obtain an underwriter’s approval, fulfill underwriting conditions, close, get your keys, and do your happy dance!

Depends on the loan type. For FHA loans a 580 FICO qualifies for 3.5% down. Below 580, down payment increases to 10%. 

Conventional loans require a FICO of 620. No down payment with VA loans with a FICO of 580, below 580 and a 10% down payment is required. 

DPA (Down Payment Assistance) programs require 580-700 FICOs. 

Loan types that don’t require a standard income calculation range from FICOS 580-720. These are no income doc, bank statement, P&L, 1099, DSCR loans, etc. 

The simple answers are, it depends on how much dept you have and the type of program you’re using. You and your neighbor can have the same exact income, credit score, purchase price, same loan type, and only one of you be approved. 

In this scenario, it’s 100% debt related. You may have less monthly obligations (debt reflecting on your credit report) than your neighbor and therefore your DTI meets the requirements. 

Keep in mind you DO NOT need income to buy a house but it’s more economical to use income to buy.

DTI is your monthly obligations divided by your income. That percentage is your DTI. Monthly obligations are your housing expense (mortgage payment, taxes, insurance, mortgage insurance, applicable HOA, and any second mortgage payments) and all open debts on your credit report.  Loan types have different DTI maximums: FHA 56.99%, Conventional 50%, while the VA has no specific maximum DTI threshold. 

Example: You determine you don’t want to pay more than $3000 for a mortgage. Your income is $100,000 ($8333 monthly). You have an auto payment ($500), a personal loan ($250), and your total monthly credit card payments are $400 for a total of $1150 in monthly obligations. 

$1150 (monthly obligations) + $3000 (mortgage payment) = $4150

Now we know your total income and your total monthly obligations. Divide your obligations by your income to get your DTI. 

$4150 / 8333 = .4980

.4980 x 100 = 49.80% DTI

With a DTI of 49.80% you potentially qualify for an FHA, Conv, and VA loan. his item.

It varies due to a myriad of factors. Expect to pay 4% - 8% of the purchase price. 

Example: purchase price $500k

Down Payment (3.5%) = $17,500

Closing Costs (4.25%) = $21,000 

Toal FTC (Funds To Close) = 7.7%

Don’t let this scare you because this is where DPA and seller credits (see question 11 for seller credit) can reduce your FTC dramatically, ranging from 0% - 3% of the purchase price. 

Once in escrow, 15-30 days. It can take longer for an innumerable number of reasons, but most buyers go under contract for 30 days. DPA loans close within the same time frame. Construction loans can take 45-60 days due to the more complicated moving parts.  answer to this item.

You get pre-approved just like anyone else not using DPA. There are hundreds of DPA programs out there and they all have their differences.

Some notables…

· Income limits / no income limits

· Must be FTHB (First-time homebuyer / No FTHB required

· 2nd mortgage payment required / No 2ndmortgage payment required

· Grants / No grants

· All require some form of homebuyer education (usually online)

· All require a home warranty (see question 12)

Please see the “Services” tab at the top of the page. .

Self-employed income is calculated using net income (after write-offs aka expenses) from tax returns. Many self-employed people write-off as much as possible to lower their tax liability. I’ve had clients grossing $1,000,000 but after expenses, show negative $20,000 in net income. 

That -$20,000 figure is what lenders have to use. If you’re showing enough net income to get approved, you’ll qualify for a loan like any W2 wage earner and can qualify for DPA programs. If you’re unable to show net income, you can utilize loans that don’t require tax returns (i.e. bank statement, P&L, 1099 loans, no income docs, etc.). 

When going off the grid with these types of loans there’s no DPA available, down payments are higher (10% - 20%), rates are higher, and thus mortgage payments are higher.  They are phenomenal options when affordability allows it. The silver lining with these off the grid loans are, there’s no MI (mortgage insurance, see question #10).

Mortgage insurance protects the lender – not you - in the event of a foreclosure. Mortgage insurance will cover a percentage of the balance owed after foreclosure proceeding. There’s no mortgage insurance on VA loans and off the grid loans (the technical term is non-QM) which are considered Conventional loans. 

Standard Conventional loans with less than 20% down require mortgage insurance – some exceptions exist. While the USDA doesn’t call it mortgage insurance, there’s a monthly guarantee fee. FHA loans always require mortgage insurance no matter the size of the down payment. 

  A seller credit (aka seller concession) lowers your out-of-pocket costs by the amount of the credit. Seller credits cannot be applied toward the down payment but can absolutely cover some to all closing costs. 

If your closing costs are $15,000 and the seller credit is $10,000, you’re only responsible for $5k of the closing costs. With VA loans, the seller credit can even be applied to the buyer’s debt! Seller credit working in conjunction with DPA programs are how people buy houses with “zero down.”

A home warranty (needed for DPA programs) covers some to all appliances in the home while homeowner’s insurance (not to be mistaken with mortgage insurance) covers the property itself. Neither insurance covers 100% of everything but it’s great to have the coverage.  When financing a house, just like car insurance, homeowner’s insurance is mandatory. 

Real estate agents almost always negotiate with the listing agent to have the seller of the house pay for the home warranty whether you’re using DPA or not, so rarely is this something the buyer pays for.