Mortgage questions, answered plainly.
Answers by Sam Alpert, President and Mortgage Loan Originator, NMLS #1961555. Licensed in New Jersey, Pennsylvania and Texas.
Down payments
How much do I actually need to put down?
It depends on the loan program, and the range is wider than most people think. Conventional loans start at 3% down. FHA is 3.5%. VA and USDA can be zero down if you qualify. Investment property is usually 15% to 25%. The right question isn't the minimum, it's what the payment looks like at each level once mortgage insurance is factored in.
Is 20% down still the rule?
No. 20% is the point where you avoid private mortgage insurance on a conventional loan, which is where the number comes from. It has never been a requirement to buy. Most first-time buyers we work with put down between 3% and 10%.
Can the down payment come from a gift?
Yes, on most programs. The money has to be documented with a gift letter stating it does not have to be repaid, and the lender will want to see the transfer. Who can gift depends on the program. Conventional generally requires a family member. FHA is broader.
What about down payment assistance?
New Jersey has programs through the NJHMFA, and there are county and municipal options on top of that. Eligibility usually turns on income limits, purchase price limits, and whether you have owned in the last three years. Ask before you assume you don't qualify.
Credit score
What credit score do I need to buy a home?
The practical floor is around 580 for FHA and 620 for conventional, though individual lenders set their own overlays above those minimums. Non-QM and bank statement programs often start around 620 to 660. Your score also affects pricing, not just approval.
Which score do lenders actually use?
Mortgage lenders pull all three bureaus and use the middle score, not the average and not the highest. If there are two borrowers, the lower of the two middle scores usually governs. This is why the score you see on a free app is often not the one that matters.
Will getting pre-approved hurt my score?
Barely, and not for long. A mortgage inquiry typically costs a few points and recovers within months. Multiple mortgage inquiries inside a short shopping window count as one inquiry, so comparing lenders does not stack up against you.
I have a collection, a late payment, or a bankruptcy. Am I done?
No. Collections often do not have to be paid off to close, depending on the program and the amount. Chapter 7 bankruptcy has a waiting period that runs two to four years depending on the loan type. Chapter 13 can sometimes close while still in the plan. Send us the report and we will tell you where you actually stand.
Pre-qualification vs pre-approval
What's the difference?
A pre-qualification is a conversation. A pre-approval is a file. Pre-qual means somebody took your word for your income and credit. Pre-approval means a lender pulled credit, reviewed documents, and issued a letter based on what they verified. Listing agents know the difference.
Is a fully underwritten pre-approval a real thing?
Yes, and it is the strongest version. A standard pre-approval is reviewed by a loan officer. A fully underwritten one goes to an actual underwriter before you make an offer, which means the conditions left at contract are mostly property-related. In a competitive offer situation this is the difference-maker.
How long is a pre-approval good for?
Typically 90 days. Credit reports and income documents go stale, so the letter has an expiration. Refreshing one is usually quick if nothing about your situation changed.
Does a pre-approval lock my rate?
No. A pre-approval addresses whether you qualify and for how much. A rate lock is a separate step that happens once you have a property under contract.
Closing costs
How much are closing costs?
In New Jersey, plan on roughly 2% to 5% of the purchase price, not counting your down payment. The range is wide because transfer taxes, title, and prepaid escrows vary by price point and county. You get an itemized Loan Estimate within three business days of applying.
What's actually in that number?
Three buckets. Lender fees like origination and underwriting. Third-party fees like appraisal, title, survey, and attorney. And prepaids, which are not really fees at all but the property taxes and insurance you fund into escrow up front. Only the first bucket is negotiable with your lender.
Can the seller pay them?
Often, yes. It is called a seller concession and it is negotiated into the contract. Programs cap how much the seller can contribute, generally between 2% and 9% depending on the loan type and your down payment.
Can I roll closing costs into the loan?
On a purchase, generally no, though you can sometimes structure a lender credit that covers them in exchange for a higher rate. On a refinance, yes, closing costs are commonly financed into the new loan balance.
PMI & MIP
What is PMI?
Private mortgage insurance is a monthly charge on conventional loans when you put down less than 20%. It protects the lender, not you. The cost depends on your credit score and how much you put down.
How do I get rid of it?
On a conventional loan, PMI drops automatically once the balance reaches 78% of the original value, and you can request removal at 80%. If your home appreciated, a new appraisal can get you there faster than the amortization schedule would.
Is FHA MIP the same?
No, and the difference matters. FHA charges an upfront premium plus a monthly one, and on most FHA loans with less than 10% down the monthly premium stays for the life of the loan. The usual exit is refinancing into a conventional loan once you have equity.
Can I avoid PMI without 20% down?
Sometimes. Lender-paid mortgage insurance trades the monthly charge for a higher rate. A piggyback second mortgage can bridge the gap. Which one wins depends on how long you plan to keep the loan, and we run both.
Rate locks
When can I lock my rate?
Once you have a property address and an accepted contract. Some lenders allow a lock before that, but most locks start when there is a real transaction to attach it to.
How long can I lock for?
Common lock periods run 30, 45, and 60 days. Longer locks cost more in pricing. New construction sometimes needs an extended lock, which is priced differently.
What if rates drop after I lock?
Some lenders offer a one-time float-down, usually with conditions about how far rates have to move and when you can use it. It is not automatic and it is not universal, so ask before you lock rather than after.
What happens if we don't close in time?
The lock expires and you either extend it, which costs money, or re-lock at whatever the market is that day. Extensions are usually priced per day. The best way to avoid this is picking a realistic close date up front.
Timelines
How long does the whole process take?
Our average is 21 days from application to closing. Thirty to forty-five days is more typical across the industry. The variable is almost never underwriting speed, it is how fast documents come back and how fast the appraisal gets scheduled.
What can slow it down?
Late documents, large unexplained deposits, appraisal delays, title issues, and any change to your employment or credit during the process. Every one of those is predictable and most are preventable.
How long does a refinance take?
Usually similar to a purchase, sometimes faster because there is no seller, no realtor timeline, and no moving truck. Cash-out refinances on a primary residence have a mandatory three-day right of rescission after signing.
Can I close faster if I have to?
Often yes. If your documents are ready and the appraisal cooperates, files can move quickly. Tell us the date you need at the start, not two weeks in, and we will build the file around it.
Documents you'll need
What's the standard document list?
Two years of W-2s, two years of tax returns, your most recent 30 days of pay stubs, two months of bank statements on every account you are using, and photo ID. Self-employed borrowers add business returns and a year-to-date profit and loss. That is the starting list, not the ending one.
Why all pages of bank statements?
Because underwriters have to see the full statement to confirm nothing is missing, including the page that says 'this page intentionally left blank.' A partial statement gets returned every time. It is not us being difficult, it is a document integrity rule.
Do I need to explain every large deposit?
Any deposit that is not a regular payroll direct deposit will get flagged. The threshold is usually anything over half your monthly income. You will need to source it, meaning show where it came from, because underwriters are confirming the money is not borrowed.
What about self-employed borrowers?
If your tax returns show what you actually earn, standard programs work with two years of returns. If write-offs make your income look smaller than it is, bank statement loans qualify you on twelve or twenty-four months of deposits instead. There are also 1099 programs and profit-and-loss-only options. This is a large part of what we do.
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