Mortgage & Home Buying FAQ

Pre-qualification is an informal estimate of what you might be able to borrow based on self-reported financial information. It is quick and does not require verification.

Pre-approval is a formal commitment from a lender. The lender pulls your credit report and reviews financial documents (W-2s, tax returns, pay stubs) to verify your income and assets. Pre-approval letters show sellers that you are a serious, qualified buyer.

The minimum credit score varies by loan type:

• Conventional Loans: Typically require a minimum score of 620.
• FHA Loans: Allow scores as low as 500 (with a 10% down payment) or 580 (with a 3.5% down payment).
• VA and USDA Loans: Often require a score of 580 to 640 depending on the lender.

Generally, a score above 740 is required to secure the lowest interest rates.

Mortgage rates are determined by a combination of market forces and your personal credit profile:

• Market Forces: Inflation, economic growth, central bank decisions (like the Federal Reserve), and trading in the mortgage-backed securities market.
• Personal Profile: Your credit score, down payment size, debt-to-income (DTI) ratio, property type (primary residence vs. investment property), and loan term (15-year vs. 30-year).

Closing costs are the fees paid to lenders and third parties to finalize a mortgage. They typically total **2% to 5%** of the home's purchase price and include:

• Loan origination fees
• Appraisal and home inspection fees
• Title search and title insurance
• Attorney and recording fees
• Pre-paid property taxes and homeowners insurance

For a $300,000 home, expect closing costs to be between $6,000 and $15,000.