How much you qualify for is based off several factors including your income, assets, and debt. While your loan officer is determining your pre-approval limit, they will look at how much you can bring to closing and your DTI (Debt-to-Income) ratio.  Your DTI is determined by subtracting your monthly debt from your total gross income. Monthly debt is generally going to be your minimum monthly payments to creditors, such as credit cards, auto loans, or current mortgage payments. When taking into account your income, your loan officer will have to follow guidelines. Just because you are receiving overtime or bonuses doesn’t mean they can be counted towards your monthly income. 

Closing times are always case by case and are influenced by many factors such as:

• The loan program
• Time it takes to receive the home inspection decision
• Time it takes for appraisal to be received
• Time to receive documentation from the borrower, agents, title company
• Time for underwriting and processing

Generally, the rule of thumb for Conventional, FHA, VA or USDA loans is 30 days from the date of the purchase agreement. For MSHDA loans, it is generally 45 days. For Non-QM loans, closing times should be discussed with your loan officer.

Home inspections are not required. although it is a good idea to have one completed. With a home inspection a professional inspector can help you determine whether or not the home you’re purchasing is right for you. They can look at foundation, roofing, plumbing, electrical, appliances, and other times in the home. If something negative comes up during the inspection, you can address the issues with the sellers prior to continuing with the sale.

Unlike a pre-approval where your income, assets, and credit is verified, a pre-qualification is based off what you say. A pre-qualification helps give you an idea of what you could potentially be pre-approved for. This doesn’t require your credit being pulled or submitting any documentation. Although, realtors or sellers will not accept this document like they would a pre-approval.

Documentation needed does vary case-by-case and is based off of many factors. There is standard documentation that is need with each loan which can be found here:

Your Document Checklist

Private mortgage insurance, also referred as PMI, is mortgage insurance you may be required to pay on a conventional loan. Private mortgage insurance protects the lender if you stop making payments on your loan. PMI is usually required on loans with a down payment less than 20%. You may request that your service remove your PMI after your loan-to-value (LTV) ratio is 80%. Your PMI will automatically drop off once your LTV reaches 78%. PMI is different than the FHA mortgage insurance premium, MIP.

MIP is mortgage insurance that is required on all FHA loans regardless of the down payment size. The mortgage insurance premium is paid annually to your servicer to protect them in case you default on your loan. You make monthly payment to your escrow account to pay for the MIP each year. When you close on your loan you also pay an upfront mortgage insurance premium (UFMIP) which may be financed into your loan amount. The MIP and UFMIP amount is 1.75% of your total loan amount.

Generally, 6 months before you are wanting to purchase a home. This gives you and your loan officer time to make sure you are in the best shape to purchase a home when the time comes. This also gives you time to address any issues that may arise with your employment, credit, etc.

There’s no way to say exactly how much you will need to close. You can receive estimates if you have a full application and particular property. It is a good idea to have as much as you can saved up. Not only do you want money for your closing costs, but money for expenses and items like furniture for your new home.