Or what I think is asked the most


As soon as the idea of buying a house creeps into your head. The sooner you start the process the fewer issues you will have. Too many unknowns can come up which are no big deal when you have time to deal with them. Your realtor will love you that much more when they realize that all they need to do when you contact them is to find you a house.


It doesn’t really need to be that bad. If I do my job correctly, I will let you know what is needed upfront and lay out the entire loan process, so you fully know what to expect and there are no huge surprises.  While I don’t have a crystal ball for all the wants of the underwriters, I have been doing this long enough to have a good idea of what they will ask for based on the items that you give me.


In the perfect world, 20%. But we don’t all live in the perfect world so you can put down as little as 3% with some conventional loans, 3.5% with FHA loans. The purpose of putting down 20% is to avoid paying mortgage insurance. But having mortgage insurance is not the end of the world if it means you can buy a house now instead of taking twelve years to save up the 20%.


A pre-qual is when I run your file through the Automated Underwriting System and getting an approval.
A pre-approval is when an actual underwriter looks at your file and gives her approval.


Using a real estate broker is a very good idea. All the details involved in home buying can be mind-boggling. A good real estate agent can guide you through the entire process and make the experience much easier and make sure that all your interests are protected and that you have outs in case their are issues with the house that come up during the homebuying process.


Upfront costs are charged by multiple parties (examples include: lender, appraiser, credit bureau, local government taxes, homeowners insurance companies, attorneys/title company, etc.) Most of these costs will not change regardless of the loan type or the lender, but some will.

Upfront lender-related fees are common. They add to the overall cost of financing. Therefore, the NOTE rate differs slightly from the actual or “effective” rate you’re paying on your money.

The Truth In Lending Act stipulates that lenders must quote that effective rate in the form of APR or annual percentage rate.  If you don’t read anything else on APR, it’s important to know that not all lenders calculate them the same way, and APR can’t necessarily be trusted as an apples to apples comparison between two or more lenders.

For the purposes of understanding mortgage rate building blocks, we’ll simply use the term “upfront costs.” Whether we’re talking about the interest portion of your mortgage payment or upfront lender-related costs, it’s all money that ends up going from your wallet to the lender. In most cases, you have some say in dividing up the lender’s upfront income versus their income over time.

For instance, you will typically have the option to pay more upfront in exchange for a lower interest rate. The industry has long referred to this type of extra upfront payment as “points” or “discount points.” Despite any negative connotation from certain financial media pundits, points are neither good nor bad--simply a choice to pay now or pay later.

Only you can decide which way makes most sense for your scenario. The only thing that really matters is the trade-off between the two choices.

If you invest your extra cash and earn a certain rate of return, you may be better off minimizing your upfront costs and putting that money into your investments.

If, on the other hand, you wouldn’t be earning a great return on that money and you know you’ll have the mortgage for a long time, it may make sense to “buy down” the rate with additional upfront cost.


Prepaid finance charges (or PFCs) are neither good nor bad. They are not scandalous or uncommon. A loan without them isn’t necessarily a better deal than a loan with lots of them. And even if you’re told you’re not paying PFCs, most of them will still need to be paid by someone. Typically, this involves the lender offering a higher interest rate and then paying the PFCs for you. In that example, you’ve simply financed the PFCs by paying higher interest over time. Again, that’s neither good nor bad--just a choice between paying more upfront or more over time.
PFCs are most notable because they determine annual percentage rate (APR) of a loan. Lenders are required by law to disclose APR. This is a good idea in concept, but not so simple in practice. Regulators figure the requirement levels the playing field by forcing lenders to give consumers an idea of what the true cost of financing will be.
Indeed, the notion of quoting mortgage rates in terms of NOTE rates and upfront lender-related costs is fantastic and ideal. Unfortunately, regulators leave it up to lenders to do their own APR calculations. While most lenders do things the same way, others do things differently in order to quote a lower APR than their competitors. Some lenders are simply more conservative in what they define as a PFC because they want to avoid regulator scrutiny. Those lenders may have higher APR quotes than others even if every single upfront costs is exactly the same.
Bottom line, APR is not necessarily apples to apples. You shouldn’t blindly trust one lender’s APR over another. As tedious as it may be, the best way to compare quotes is to see what the upfront cost assumptions are line by line.