FAQs

A mortgage is a loan used to purchase a home. The lender provides funds upfront, and the borrower repays it over time (typically 15-30 years) with interest. The home serves as collateral, meaning the lender can take possession if payments aren’t made.

A mortgage broker works with multiple lenders to find the best loan options for borrowers, offering more flexibility and competitive rates. Banks lend directly but only offer their own products, which may be more limited.

Lenders consider your income, debt-to-income (DTI) ratio, credit score, and down payment to determine affordability. A general rule is that your total monthly mortgage payment should not exceed 28-31% of your gross monthly income.

Debt-to-Income Ratio (DTI) is a key financial metric lenders use to assess a borrower’s ability to manage monthly payments. It compares your total monthly debt payments to your gross monthly income.

How is DTI Calculated?

Total Monthly Debt Payments divided by Gross Monthly Income

Example Calculation:

Total Monthly Debt Payments: $2,000 (including mortgage, car loan, student loans, credit cards, etc.) Gross Monthly Income: $6,000 DTI Ratio: (2000/6000)×100=33.3%

Why Does DTI Matter?

Lenders use DTI to determine how much of your income is already committed to debts. A lower DTI means you have more financial flexibility and are less risky to lenders.

What DTI Do Lenders Prefer?

Conventional Loans: Below 43% (sometimes up to 50% with strong credit)

FHA Loans: Up to 50%

VA Loans: Preferably below 41%, but flexible

USDA Loans: Around 41%

Credit score, loan amount, down payment, loan type, market conditions, and economic trends all influence interest rates.

A fixed-rate mortgage has the same interest rate for the entire loan term, ensuring consistent payments. An adjustable-rate mortgage (ARM) has a lower initial rate but can fluctuate after a set period.

Common documents include:

• Proof of income (W-2s, pay stubs, tax returns)
• Credit report Bank statements
• Employment verification ID (driver’s license or passport)

The pre-approval process takes a few days, while full approval (including underwriting) can take 30-45 days.

Pre-qualification is an estimate of what you may be able to borrow, based on self-reported financials.

Pre-approval is a formal offer from a lender, requiring verification of financial documents.

Yes, but only slightly. Lenders conduct a hard credit inquiry, which may lower your score by a few points.

Yes, but you’ll need to provide two years of tax returns, profit-and-loss statements, and bank statements to verify income.

It depends on the loan type:

• Conventional loans: as low as 3%
• FHA loans: 3.5%
• VA/USDA loans: 0%
• Jumbo : as low as 5%

Yes, Conventional (3%) FHA (3.5%), VA (0%), and USDA (0%) loans offer low-down-payment options.

Closing costs cover lender fees, title insurance, taxes, and more. They typically range from 2-5% of the home price.

Sometimes, but it depends on the lender and loan type. VA loans allow this, and some lenders offer lender credits to help cover costs.

PMI is required if you put down less than 20% on a conventional loan. It protects the lender if you default and can be removed once you reach 20% equity.