Most loans that fall apart do not fail at pre-approval. They fail in the six weeks after it, over things the buyer did not know counted.
A pre-approval letter is a snapshot. Underwriting is a moving target that gets re-checked right up to the closing table, and a surprising number of ordinary financial decisions can move it: a furniture card, a transfer between your own accounts, a job that pays better. Here is what a lender will actually ask for, how to shop without damaging your credit, and the mortgage insurance rules that decide whether you can ever get out of it.
46 items · 21 most people miss · free, no signup
What will the lender actually ask me for?
Pay stubs covering the last 30 days. Straight from the CFPB’s loan application packet list.
Most people miss thisW-2s for the last two years, and signed federal tax returns for the last two years. The CFPB lists two years of returns for everyone, not only self-employed borrowers. Many buyers assume returns are a self-employment-only request and get caught flat-footed.
Your two most recent bank statements, complete. All pages, including the blank ones, as PDFs downloaded from the bank showing your name, the account number, and the institution. Screenshots and partial pages are the single most common cause of a delay.
Most people miss thisTwo months of ownership history on down payment funds. The CFPB describes it as statements showing at least two months of ownership. Money that landed last week is harder to use than money that has been sitting there.
Photo ID, Social Security number, and any recent name change documentation. Plus a two-year address and employment history.
Gift funds need a signed gift letter and a full paper trail. From the donor’s account into yours. Start this weeks ahead, not days.
How do I shop rates without wrecking my credit?
Most people miss thisThere is a rate-shopping window, and it is generous. Newer FICO models treat multiple mortgage inquiries inside a 45-day window as a single inquiry. Older models use 14 days. The CFPB confirms the 45-day figure for mortgage lenders.
Most people miss thisThere is also a 30-day buffer on top of that. FICO scores ignore rate-shopping inquiries under 30 days old. Combined with the window, shopping hard for two weeks does far less damage than most buyers fear.
Most people miss thisThe FICO window only groups the same loan type. Mortgage inquiries group with mortgage inquiries. Shopping a car loan in the same stretch counts separately. VantageScore works differently again, de-duplicating major inquiries inside 14 days regardless of type.
Contact at least three lenders. That is the CFPB’s own number, and it estimates that offers from multiple lenders can save meaningfully over a year.
Do not open or close accounts while you are shopping. Both move the score for reasons underwriting then has to re-examine.
Pull your own reports first and correct errors. Use annualcreditreport.com. Disputes take time you will not have once you are under contract.
What can I actually afford, in a lender’s terms?
Debt-to-income is monthly debt payments divided by gross monthly income. It is the number that decides your ceiling, and it is not the same as your budget.
Conventional loans through Fannie Mae’s automated system allow up to 50 percent total DTI. Manually underwritten loans start at 36 percent and can reach 45 percent when the borrower meets the credit score and reserve requirements in the Eligibility Matrix.
Most people miss thisFannie Mae has no separate front-end housing ratio. The two-ratio structure people quote (31/43) is an FHA construct for manually underwritten loans, not a conventional one.
Most people miss this43 percent is not a current federal rule. The 43 percent General Qualified Mortgage DTI cap was replaced by a price-based limit in the 2020 General QM Final Rule. The CFPB’s consumer page defines DTI and does not publish a cap.
Most people miss thisWhat gets counted is the full payment, not principal and interest. Taxes, insurance, and HOA dues all go into the ratio. In DFW and the OKC metro taxes and insurance are a large share of the payment, so national rules of thumb overstate what your income buys here.
Most people miss thisMUD and PID charges count too. In newer North Texas developments those flow into the escrowed payment and therefore into your DTI. Ask about them before you fall in love with a house.
Qualifying at the maximum is not the same as being comfortable at it. Build your own number from your actual spending, then treat the lender’s ceiling as a limit rather than a target.
What should I not do between pre-approval and closing?
Do not open new credit. A furniture card, a vehicle, a financed appliance plan. Each adds a payment and an inquiry. Fannie Mae instructs lenders to examine inquiries for undisclosed credit and to correct and resubmit the application if new debt was obtained.
Do not change jobs, move from salaried to 1099, or cut your hours. Employment gets re-verified late in the process.
Most people miss thisDo not make deposits you cannot document. Fannie Mae defines a large deposit as a single deposit exceeding 50 percent of the total monthly qualifying income. Anything over that line has to be sourced on a purchase.
Most people miss thisDo not shuffle money between your own accounts to tidy up. The CFPB notes it is common for buyers to have large deposits from transfers between their own accounts. Every transfer creates a new deposit that has to be explained across two sets of statements. Pick the account early and leave it alone.
Do not pay off collections or charge-offs on your own initiative mid-process. It can change the file in ways you did not intend. Ask the loan officer first.
Most people miss thisLenders commonly refresh credit before closing. A new tradeline appearing between application and closing can send the loan back through underwriting or end it. Do not let anything go late, including a utility bill that could route to collections.
Where does all the money actually go?
Earnest money is a good-faith deposit, not an extra cost. The CFPB notes that if the sale closes it may be applied to closing costs or the down payment. Note the conditional wording, and confirm the credit in your contract.
In Texas, the option fee is a separate item from earnest money. It buys a defined right to terminate during the option period. Whether it is credited at closing depends on your contract, so read that paragraph rather than assuming.
Down payment is your equity contribution. Closing costs are the transaction fees. Origination charges, appraisal, credit report, title insurance, recording.
Most people miss thisPrepaids are not fees, they are your own money moving into escrow. Your first-year insurance premium and several months of taxes are collected up front to fund the account. This is a major reason closing cost quotes vary between lenders. Compare Loan Estimates, which all lenders must issue in the same standard format.
Escrow accounts are regulated. Under 12 CFR 1024.17 the servicer may hold a cushion of up to two months of escrow payments, no greater than one-sixth of estimated annual disbursements.
Most people miss thisThis is why the payment changes after year one. The servicer must run an escrow analysis at the end of each computation year. If taxes or insurance rose you get both a higher monthly amount and a catch-up for the shortage.
Most people miss thisNew construction is the classic escrow shock. For new construction, first-year taxes are often based on the unimproved land value while the second year is based on the improved value. Ask your lender how they estimated your taxes and budget for the reset in year two.
Rate locks, points, and the fine print
A rate lock holds your rate if you close in the window and nothing changes. The CFPB notes locks are typically available for 30, 45, or 60 days, sometimes longer, and that lock status appears on page 1 of the Loan Estimate.
Most people miss thisThe Loan Estimate will not tell you what an extension costs. The CFPB says so directly and warns it may be expensive to extend. Ask for the extension cost in advance and agree on who pays if a delay is not your fault.
A float-down lets you capture a lower rate after locking. It is a market practice rather than a regulator-defined product, it is not automatic, and it usually carries a fee. Ask whether your loan has one and what triggers it.
Discount points are prepaid interest. One point equals one percent of the loan amount. They lower your rate in exchange for paying more at closing.
Most people miss thisPoints are on page 2, Section A of the Loan Estimate and Closing Disclosure. Not page 1. If you are comparing lenders, that is where to look.
Run the arithmetic before you buy points. Divide the cost of the points by the monthly payment reduction to find how many months it takes to break even. If you are likely to sell or refinance before then, that cash is better used elsewhere.
Most people miss thisThree specific late changes restart the three-day clock. Per the CFPB’s TRID guide, a new waiting period applies for an increase to the disclosed cost measure that makes it inaccurate, the addition of a prepayment penalty, or a change of loan product. Nothing else triggers it. That is a real schedule risk on a tight closing.
How do I get rid of mortgage insurance?
Request cancellation at 80 percent. Under the Homeowners Protection Act you may request cancellation when the balance reaches or is first scheduled to reach 80 percent of the original value, with a written request, a good payment history, being current, and evidence the value has not declined.
Most people miss thisOriginal value is the lesser of purchase price or appraised value at consummation. Not today’s value. And good payment history has a definition: no payment 60 or more days past due in the first 12 months of the last two years, and none 30 or more days past due in the prior 12 months.
Automatic termination at 78 percent. The servicer must terminate when the balance is first scheduled to reach 78 percent of original value, if you are current. This one has no decline-in-value test and no junior-lien test.
Final termination at the midpoint of the amortization period. After 15 years on a 30-year loan, if you are current.
Most people miss thisThere is a separate path based on today’s value. Fannie Mae servicing guidance allows cancellation on current value for a one-unit principal residence at 75 percent loan-to-value or less when seasoned two to five years, or 80 percent or less when seasoned more than five years. This usually means paying for an appraisal. Ask your servicer which path they accept.
Most people miss thisFHA is the one that costs people the most, and it does not come off. Under HUD’s current schedule, FHA loans above 90 percent loan-to-value at origination carry the annual premium for the mortgage term. At 90 percent or less it runs 11 years. There is also an upfront premium usually financed into the loan.
The practical consequence. On a minimum-down FHA loan the only exit from the annual premium is refinancing out of FHA entirely. Weigh that against conventional with your lender before you choose, not after.
Dates and deadlines to know
Within 3 business days of application
Your Loan Estimate must arrive.
At least 3 business days before closing
Your Closing Disclosure must arrive. Read it against your Loan Estimate line by line.
Inside a 45-day window
Concentrate your rate shopping so newer FICO models treat the inquiries as one.
Two months back from application
That is the bank statement period underwriting will examine, so finish any account consolidation before that window opens.
Before your rate lock expires
Confirm the closing date or negotiate extension terms in advance, because the Loan Estimate will not price it for you.
This guide is general information, not legal or tax advice. Loan program rules, ratios, and mortgage insurance treatment vary by lender, investor, and loan type. Confirm specifics with your lender, and tax questions with your CPA, attorney, or tax professional.
Published by Mac Does REI. The McDonald Group provides brokerage services through Fathom Realty in Texas and Dillard Cies Real Estate in Oklahoma. NTX Realty Trust is a separate company and is the principal cash buyer. Nothing here is legal, tax, or insurance advice.
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