TL;DR: Master five areas—credit, cash, capacity (DTI), collateral (property risk), and conditions (rates & market). Use the checklists to budget, compare rate/points, vet HOA & insurance risk, prioritize inspections, and structure a resilient offer.
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Are You Really Ready? The 5‑Box Framework
Credit: 60–90 days of smart prep
- Time utilization paydowns to statement close dates for best reporting.
- Rapid‑rescoring is lender‑facilitated and for correctable data only—bring documentation.
- Avoid new disputes or credit lines during underwriting; they can stall approvals.
Capacity (DTI): how income is read
- Overtime/bonus often averaged; self‑employed income needs history + add‑backs.
- Student loans: IDR documentation can lower DTI; verify servicer requirements.
Cash: it’s more than the down payment
- Plan for earnest money, inspections, appraisal, closing costs, and reserves.
- Gift funds require a clean paper trail (donor capacity + transfer proof).
Collateral & Conditions
- Condos: check reserve studies, delinquency, litigation, rental caps, assessments.
- Rates change—know lock/float‑down options, lender credits, and when points pencil out.
Money & Mortgage Mechanics (With Real Numbers)
PMI vs 80/10/10 vs Lender‑Paid MI
PMI keeps cash low and can be removed; piggybacks avoid PMI but add a second loan; lender‑paid MI bakes MI into the rate. Choose by time‑in‑home and refi odds.
Discount Points vs Temporary Buydowns
Illustration: Price $350,000; 5% down; loan $332,500; 30‑yr fixed. At 6.75%, P&I ≈ $2,156.59. Buying 1 point (~$3,325) to 6.50% drops P&I to $2,101.63 (≈ $54.96/mo saved). Breakeven ≈ 60 months.
Try your own numbers (P&I only)
Principal & interest only (no taxes, insurance, PMI, or HOA). Use this to feel how rate and down payment shift the monthly.
Estimated loan: $332,500.00
Estimated monthly P&I: $2,156.59
Payment sensitivity (P&I only)
| Rate | Monthly P&I |
|---|---|
| 6.50% | $2,101.63 |
| 6.75% | $2,156.59 |
| 7.00% | $2,212.13 |
| 7.25% | $2,268.24 |
| 7.50% | $2,324.89 |
| 7.75% | $2,382.07 |
Which Loan Type Fits Me?
Most first‑time buyers qualify for more than one loan type. Here’s a plain‑English overview so you know what to ask about.
| Loan Type | Good Fit When... | Things to Watch |
|---|---|---|
| Conventional | You have decent credit and at least ~3–5% down. | PMI cost/removal rules, condo underwriting, reserves in competitive markets. |
| FHA | Lower credit scores or higher DTI with low down payment. | Upfront + monthly mortgage insurance; property condition requirements. |
| VA | Eligible service member/veteran; $0 down options. | Funding fee (often financed), seller credit strategy, property standards. |
| USDA | Open to qualifying rural/suburban areas with income limits. | Location & income eligibility; sometimes longer timelines. |
We can walk through your numbers side‑by‑side so you see how payment, cash to close, and mortgage insurance differ across loan types.
Total Cost to Own (Not Just P&I)
Estimated total monthly cost: $2,996.59
This doesn’t include utilities or commuting. We’ll refine these numbers based on the exact property and local tax & insurance quotes.
PMI Removal Path: How Long Will It Stick Around?
Use this to see roughly how long PMI might last and how extra payments could help. For exact timelines, we’ll confirm your loan program and servicer rules.
PMI estimated to reach 80% LTV in 8 years and 6 months (approximate).
Decode Your Local Market
Buyer vs seller signals
Days‑on‑market, sale‑to‑list ratios, and seasonality inform offer posture and concessions.
Fair‑housing‑safe location diligence
Use official zoning, permit, and environmental risk portals (flood/wildfire/seismic). Check insurance availability and deductibles. Never steer by protected classes.
Market Pulse (High‑Level Snapshot)
- Days on market: weekend vs 30+ days?
- Sale‑to‑list ratio: below, at, or above list?
- Inventory: months of supply—tight, balanced, or loose?
- Insurance & tax trends: premiums or assessed values rising?
Ask us for a “market pulse” snapshot tailored to your price range.
Due Diligence Most Guides Skip
Inspection matrix
- Sewer scope (older homes), foundation, roof age/type, termites/pests, radon.
- Well/septic tests where applicable; for new builds, do pre‑drywall and blue‑tape.
Title & survey
- Easements, encroachments, access, unpermitted additions, condo declarations.
HOA health
- Reserve study, delinquency, litigation, rental caps, special assessments risk.
- Insurance market check: availability, deductibles, mitigation credits.
Red Flags You Should Never Ignore
- Weak condo reserves or high delinquency.
- Roof age/type insurers dislike.
- Outdated electrical panels / knob‑and‑tube wiring.
- Unpermitted additions or conversions.
- Frequent/severe water issues or prior flood claims.
- Active or recent major litigation in the HOA.
Ask Your Lender
- “How would you structure this if I plan to keep the home 3–5 years vs 10+ years?”
- “Show me points vs credits vs a 2‑1 buydown side‑by‑side.”
- “What could derail my approval at the last minute, given my file?”
Ask Your Real Estate Agent
- “Typical appraisal outcomes in this price range/area?”
- “How often do buyers win with contingencies?”
- “If you were buying this, what would you watch most closely?”
Ask Inspectors & Insurance Pros
- “Top 3 systems of concern for homes this age?”
- “Common inexpensive issues vs rare expensive?”
- “Any insurance issues with similar homes—roof age, wiring, or location?”
Offers, Negotiation & Appraisals
The Offer Ladder
- Start clean: timing, inclusions, seller convenience.
- Add value: credits, limited‑scope repairs, appraisal strategy.
- Stay disciplined: pre‑defined walk‑away triggers.
Appraisal gap options
- Bring cash (keeps LTV/MI unchanged).
- Adjust LTV (may add MI/points) to offset payment impact.
- Renegotiate credits/price; present a comps package.
- Walk per contingency if terms turn unfavorable.
Top Mistakes First‑Time Buyers Can Avoid
- Opening new credit during underwriting.
- Focusing only on the rate, not total cost.
- Ignoring insurance & tax changes.
- Skipping the inspection matrix.
- Over‑relying on online estimates.
- Not having a walk‑away number.
- Underfunding reserves and move‑in costs.
- Assuming all condos are “easier.”
- Waiting to ask questions.
Closing Day & After
- CTC → CD review → verified wire → signing → funding → keys.
- Homestead/tax exemptions (where applicable); escrow setup and shortages plan.
- Post‑close: rekey, leak audit, maintenance calendar, energy‑rebate claims.
Your First 30 Days After Closing
- Change locks or rekey; reset garage openers.
- Label/test breakers, shutoff valves, and GFCIs.
- Set a simple maintenance calendar (filters, gutters, grading checks).
- Photograph appliance serial numbers and major systems for warranties.
- Confirm escrow setup and first mortgage payment due date.
Down Payment Assistance (Where to Look)
State & Local HFAs
Grants/forgivable seconds. Watch income/price caps and occupancy rules.
Lender‑Partnered Programs
Credits for certain tracts or first‑gen buyers. Ask about FICO/DTI caps and layering.
Employer & Nonprofit Aid
Matched savings or closing‑cost grants. Confirm tax treatment and clawback periods.
Persona Playbooks & Scenarios
W‑2 Salaried
- Document bonus/overtime history; avoid new credit during underwriting.
- Negotiate lender credits vs points based on time horizon.
Self‑Employed / 1099
- Provide YTD P&L + 2 years’ returns; be careful with late write‑offs.
- Add‑backs (depreciation/amortization) may increase qualifying income.
Condo/HOA Buyer
- Reserve study quality and delinquency rate affect approval and dues.
- Ask about pending special assessments and litigation.
VA‑Eligible
- $0 down possible; funding fee varies by usage/exemption.
- Seller credits can cover many closing costs—coordinate early.
Checklists & Tools
6–12 Months Before You Buy
- Pull your credit reports and fix obvious errors.
- Track monthly spending so your future payment feels realistic.
- Build a “future home fund” for closing costs and reserves.
- Test‑drive a higher payment by saving the difference.
- Research areas: commute, price ranges, property taxes, HOA vs non‑HOA.
90‑Day Buying Timeline
- Days 1–14: Pre‑approval, budget guardrails, must‑have list.
- Days 15–45: Tours; insurance pre‑quotes; same‑day lender quotes.
- Days 46–70: Offer prep; inspection matrix; HOA review; appraisal strategy.
- Days 71–90: Appraisal & conditions; CD review; verified wire; final walk‑through.
Document Prep List
- W‑2/1099; pay stubs; two months’ bank statements; ID; gift letters; student‑loan/IDR docs; 2 years’ returns if self‑employed.
Budget & TCO Worksheet
| Category | Monthly | Notes |
|---|---|---|
| Principal & Interest | [calc] | See payment tools above |
| Property Taxes | [ ] | Varies locally |
| Home Insurance | [ ] | Deductible matters |
| HOA/Condo | [ ] | Check reserve study |
| Utilities & Commuting | [ ] | Seasonal swings |
| Maintenance & Reserves | [ ] | Higher for older homes |
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60‑Second Explainers
PMI, Simplified
What PMI is, how removal works, and how to plan around it. Open in a new tab
Appraisal Gaps: Your Options
What to do if the appraisal comes in low—cash, LTV, credits, or contingencies. Open in a new tab
Quick Glossary
- DTI
- Debt‑to‑Income ratio—percent of gross monthly income going to debt payments. See readiness & capacity ↗
- LTV
- Loan‑to‑Value—loan amount divided by home value or price (whichever is lower). See PMI removal examples ↗
- PMI
- Private Mortgage Insurance—may be removed at 80% LTV (request) or scheduled to cancel around 78% with conditions. Jump to PMI removal tool ↗
- Appraisal Gap
- When appraised value is below contract price; address with cash, LTV/points, credits/price change, or walking per contingency. See options ↗
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Sources & Disclaimers
Educational only; not legal, tax, or financial advice. Policies vary by lender and jurisdiction. Verify with licensed professionals and official agencies. Fair‑housing‑safe guidance—no steering by protected classes.
