Generally, most homeowners should aim for a mortgage payment at or below 30% of their gross household income. Use our mortgage calculator for an estimate of your total monthly payment. It'll include principal, interest, taxes, and insurance. Your monthly payment may also include Homeowners Association (HOA) fees. HOA fees vary from community to community.

Three main factors come into play when being approved for a mortgage:

• Credit score: Each loan program has a minimum credit score requirement to qualify. Higher credit scores can also make you eligible for lower interest rates.
• Down payment: Some loan programs mandate you to pay a specific amount down.
• Debt-to-income ratio (DTI): Your debts should only account for a certain percentage of your income because you're about to incur a significant and essential debt by purchasing a home.

These are the credit score ranges that may impact your terms and ability to get approved for a mortgage: 

300 to 579 - You may not be eligible for any mortgage option 

580 to 620 - This is generally the mortgage qualification starting point 

720 to 850 - You may qualify for the best rates and terms.

Also known as discount points, mortgage points work as a one-time fee you can pay if you'd like a reduced interest rate.

One mortgage point is equal to one percent of your total loan amount and may drop your interest rate between one-eighth to one-quarter percent lower.

Lenders usually charge their fees, which can vary greatly. For example, one lender may waive a fee but add another. Another lender might quote an interest rate before adding or subtracting discount loan points that can alter the total cost of a mortgage.

It's generally a good time to refinance when mortgage rates are 2% lower than the present rate on your loan. It may be viable even if the interest rate variation is only 1% or less. A reduction can lower your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be around $770 on a $100,000 loan at 8.5%; if the rate were reduced to 7.5%, your payment would then be $700, and now you're saving $70 per month. Of course, your savings depend on your income, budget, loan amount, and varying interest rates. Your trusted lender can help you calculate your options.

One mistake that home buyers commonly make is not getting pre-approval. Unfortunately, many home buyers believe that a pre-qualification is the same as a pre-approval. This is the furthest from the truth.

A mortgage pre-qualification can easily be defined as estimating how much a buyer can borrow. However, in many cases, a pre-qualification is only as good as the paper written on it. It's relatively common practice that a mortgage lender who pre-qualifies a buyer asks them for information such as income, debts, and other assets without verifying the data. 

A mortgage pre-approval can be easily defined as a written commitment from a mortgage lender for a buyer. To obtain pre-approval, a buyer must provide the documents needed when formally applying for a mortgage, such as W-2s, pay stubs, and bank statements.

These are some common home loan programs that homebuyers can choose from. We offer all four of these, plus several more options. Let's take a quick look at what makes each unique. 

• Conventional - Lower rates and fees for borrowers making a down payment with good credit
• FHA - Popular with first-time homebuyers due to lower down payment requirements
• USDA - Zero-down options for rural borrowers in small towns
• VA - Competitive rates, zero-down options, and no private mortgage insurance (PMI) needed for veterans, active service members, and their surviving spouses.

The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.

The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.

Because APR calculations are effected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.

The following fees are generally included in the APR:

• Points - both discount points and origination points
• Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
• Loan-processing fee
• Underwriting fee
• Document-preparation fee
• Private mortgage-insurance
• Escrow fee

The following fees are normally not included in the APR:

• Title or abstract fee
• Borrower Attorney fee
• Home-inspection fees
• Recording fee
• Transfer taxes
• Credit report
• Appraisal fee

Yes! Get in touch with your loan officer, and they can lock in the interest rate you were quoted.

• You'll be provided a written Rate and Price Determination Agreement detailing the interest rate, loan terms, and period for the rate lock.
• You could use a rate shield to lock your rate for up to 270 days, with the choice to float down to a lower rate if rates drop within 45 days of closing.

You can use a handy app to get pre-qualified for a mortgage and get a rate quote based on your individual financing needs and specific loan needs. This interest rate quote is customized. So, it's customized for your profile and financial situation. The rates reported in the media are source material. Often, those rates may expire by the time you read about them.

Once you're pre-qualified and receive your rate quote, make sure you get a full, written term sheet that shows the interest rate, loan term, total monthly payment (including insurance and taxes), total cash-to-close, and line item list of closing costs before you lock your rate with a lender.

• The costs paid at closing may include attorney fees, prepaid interest, insurance fees, documentation fees, and more.
• Depending on your mortgage loan type, property location, and the borrower's closing costs may vary.
• Your closing costs are broken down in your Closing Disclosure, provided by your loan officer at least three business days before your expected closing date.

Closing costs may range from 2 to 5 percent of your purchase price. The buyer and the seller are both responsible for paying different expenses at the closing.

Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process.

Your Property

• Copy of signed sales contract including all riders
• Verification of the deposit you placed on the home
• Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved
• Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget)

Your Income

• Copies of your pay-stubs for the most recent 30-day period and year-to-date
• Copies of your W-2 forms for the past two years
• Names and addresses of all employers for the last two years
• Letter explaining any gaps in employment in the past 2 years
• Work visa or green card (copy front & back)

If self-employed or receive commission or bonus, interest/dividends, or rental income:

• Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)
• K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.)
• Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)

If you will use Alimony or Child Support to qualify:

• Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year

If you receive Social Security income, Disability or VA benefits:

• Provide award letter from agency or organization

Source of Funds and Down Payment

• Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
• Savings, checking or money market funds - provide copies of bank statements for the last 3 months
• Stocks and bonds - provide copies of your statement from your broker or copies of certificates
• Gifts - If part of your cash to close, provide Gift Affidavit and proof of receipt of funds
• Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation

Debt or Obligations

• Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements
• Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
• If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation
• Check to cover Application Fee(s)

Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.

You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

• Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
• What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
• How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
• Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.
• How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

The property is officially transferred from the seller to you at "Closing" or "Funding".

At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. You can have an attorney represent you if you can't attend the closing meeting, i.e., if you’re out-of-state. Closing can take anywhere from 1-hour to several depending on contingency clauses in the purchase offer, or any escrow accounts needing to be set up.

Most paperwork in closing or settlement is done by attorneys and real estate professionals. You may or may not be involved in some of the closing activities; it depends on who you are working with.

Prior to closing you should have a final inspection, or "walk-through" to insure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.

In most states the settlement is completed by a title or escrow firm in which you forward all materials and information plus the appropriate cashier's checks so the firm can make the necessary disbursement. Your representative will deliver the check to the seller, and then give the keys to you.