Conventional loans can go as low as 3% down for first-time buyers, FHA requires 3.5%, VA loans allow 0% down for eligible veterans and service members, and USDA loans also offer 0% down in eligible rural areas. Down payment assistance programs can reduce this further depending on your state and income.
A mortgage lender funds the loan directly using its own money or credit lines. A mortgage broker shops multiple wholesale lenders on your behalf to find the best rate and program fit. Some companies operate as both ā shopping the market as a broker while also holding in-house lending/closing capability.
A soft credit pull pre-approval does not affect your credit score, while a full mortgage application typically involves a hard inquiry that can lower your score by a few points temporarily. Soft-pull pre-approval tools let you see real rate estimates before any hard inquiry happens.
A soft-pull pre-approval can often be completed same-day, while a full underwritten pre-approval typically takes 1ā3 business days once income, asset, and credit documentation is submitted.
FHA loans require lower credit scores (580+) and 3.5% down but carry mortgage insurance for the life of the loan in most cases. Conventional loans require higher credit (typically 620+) but drop private mortgage insurance automatically once you reach 20% equity, which can make them cheaper long-term for buyers with strong credit.
Yes ā self-employed borrowers typically qualify using 2 years of tax returns to document income, though bank statement loan programs exist for those whose tax returns don’t fully reflect their cash flow, using 12ā24 months of bank deposits instead.
Closing costs typically run 2ā5% of the loan amount, covering items like appraisal, title insurance, underwriting fees, and prepaid escrow items. No-out-of-pocket closing options may be available depending on the loan program and rate structure.
Conventional loans generally cap total DTI around 45ā50% with strong compensating factors, FHA allows up to roughly 50%, and VA loans don’t set a hard DTI ceiling but use residual income guidelines instead.
No ā pre-approval typically comes first. Getting pre-approved before house-hunting gives you a clear budget and makes your offer more competitive once you do find an agent and start touring homes.
