A plain-English breakdown of loan types, qualification factors, and what to expect — so you walk into the process knowing your options.
You don't need a perfect financial picture. You just need the right loan structure for your situation. Here are common scenarios where buyers still get approved:
You're self-employed and write off a lot on your taxes — your taxable income looks lower than it actually is.
Your credit score is below 620 or has some blemishes from the past.
You had a past bankruptcy, foreclosure, or short sale.
You want to use rental income from an investment property to help you qualify.
You're a contractor or gig worker with 1099 income instead of a W-2.
You have strong assets or savings but limited monthly income on paper.
Every lender will evaluate five core things. Understanding these gives you a clearer picture before you even apply.
W-2, self-employed, 1099, rental, or asset-based. The type of income shapes which loan programs fit you.
FHA accepts from 580 with 3.5% down (or from 500 with 10% down). Conventional typically requires 620+. Non-QM programs can go lower.
Ranges from 0% (VA, USDA) to 3.5% (FHA) to 20%+ for conventional without mortgage insurance.
Debt-to-Income ratio. Most conventional loans want DTI under 45%; FHA can go higher with compensating factors. Non-QM is most flexible.
Primary residence, second home, and investment properties have different requirements and down payment minimums.
Every loan program is built for a specific type of buyer. Here's a breakdown of what's available.
A fast-reference table across the most common programs. Numbers are general guidelines — your lender will confirm exact requirements.
| Loan Type | Min. Down | Min. Credit | Income Proof | Best For |
|---|---|---|---|---|
| Conventional | 3% | 620+ | W-2 / Tax Returns | Strong credit |
| FHA | 3.5% | 580+ | W-2 / Tax Returns | First-time buyers |
| VA | 0% | Flexible | Standard | Veterans / Military |
| USDA | 0% | ~640 | Standard | Rural / Suburban |
| 30-Yr Fixed | Varies | Varies | Varies | Long-term stability |
| 5/1 or 7/1 ARM | Varies | Varies | Varies | Short-to-mid horizon |
| Bank Statement | 10–20% | Flexible | 12–24 mo Deposits | Self-employed |
| DSCR | 20–25% | Flexible | Property Cash Flow | Investors |
| 1099-Only | 10–20% | Flexible | 1099s (1–2 yrs) | Contractors / Gig |
| ITIN | 15–25% | Flexible | Alternative Docs | No SSN |
| Foreign National | 25–35% | n/a US | Foreign Income / Assets | International |
Your monthly mortgage payment is more than just paying back the loan. Here's what makes up the total — often referred to as PITI.
The portion of your payment that reduces the actual loan balance.
The cost of borrowing — determined by your rate and remaining balance.
Property taxes estimated monthly and held in escrow by your lender.
Homeowner's insurance — also typically escrowed monthly.
Mortgage insurance — required on most loans with less than 20% down. Drops off conventional loans automatically at 22% equity (or by request at 20%).
Here's how the mortgage and buying process typically flows once you're ready to move.
A lender reviews your income, credit, and assets to determine how much you can borrow. This gives you a real budget before you start shopping and makes your offers credible.
With your pre-approval letter in hand, you search and make offers with confidence. We work together here — this is where I come in.
Once an offer is accepted, you submit a complete application to your lender. They'll collect all documentation — income, tax returns, bank statements, etc.
The lender's underwriter reviews everything in detail. An appraiser confirms the property's market value. This is the most document-heavy phase.
Underwriting is done, all conditions are met, and the lender issues a final approval. You'll receive a Closing Disclosure outlining every cost.
You sign the final paperwork, funds are transferred, and you receive the keys. Average timeline is 2 to 4 weeks from accepted offer to close. Complex cases or Non-QM programs may take a bit longer.
Things buyers ask me all the time — answered plainly.
It depends on the loan. FHA accepts credit from 580 (with 3.5% down) or as low as 500 with 10% down. Conventional typically requires 620+. Non-QM programs like 1099-Only, Profit & Loss, Bank Statement, and DSCR loans have flexible options — sometimes even below 620. There's no single minimum; there's the right loan for your profile.
Yes — if you qualify for VA (veterans and active military) or USDA (certain rural and suburban areas). Both offer 0% down. FHA starts at 3.5% and conventional at 3%. If you're not eligible for those, there are also down payment assistance programs in Michigan worth exploring through your lender.
DTI stands for Debt-to-Income ratio. It's calculated by dividing your total monthly debt payments (car loans, student loans, credit cards, the new mortgage) by your gross monthly income. Most conventional loans want a DTI under 43–45%. FHA can go higher with compensating factors. If yours is high, there are Non-QM programs with more flexibility — or you can work on paying down debt first.
PMI stands for Private Mortgage Insurance — it protects the lender if you default. It's required on conventional loans when you put less than 20% down. The good news: it drops off automatically once you reach 22% equity (or you can request removal at 20%). FHA loans have their own version (MIP) which stays for the life of the loan if your down payment was under 10%; for 10%+ down, MIP drops after 11 years. VA and USDA loans don't require PMI at all.
A fixed-rate mortgage locks in one interest rate for the entire loan term — your payment never changes. An Adjustable-Rate Mortgage (ARM) starts with a fixed rate for an initial period, then adjusts periodically based on a market index. The tradeoff:
A 5/1 ARM is fixed for 5 years then adjusts annually. If you plan to sell or refinance before the adjustment period, an ARM can save you money.
Yes. Self-employed buyers have several options depending on how your business income is structured:
The issue for many self-employed buyers is that write-offs lower taxable income, which hurts on traditional loans. Non-QM programs solve for that.
Closing costs are fees paid at closing in addition to your down payment. They typically run 2–5% of the purchase price and include: lender origination fees, appraisal, title search and title insurance, attorney fees (in some states), prepaid taxes and insurance, and other third-party charges. In some negotiations, sellers can contribute toward closing costs — this is worth discussing with your agent.
Pre-qualification is an informal estimate based on self-reported info — it carries very little weight with sellers. Pre-approval is a full review of your income, credit, and assets by a lender. A pre-approval letter is what you need when making offers — especially in competitive markets. Always go straight to pre-approval before starting your search.
Yes, most loan programs allow gift funds from a family member for all or part of the down payment. You'll need a signed gift letter from the donor stating the funds are a gift, not a loan. FHA is very flexible with gift funds. Conventional allows them too, though sourcing requirements may apply. Your lender will walk you through documentation.
DSCR stands for Debt Service Coverage Ratio. It's a Non-QM loan designed for real estate investors where you qualify based on the rental income of the property — not your personal income. If the property generates enough rent to cover the mortgage, you can qualify. DSCR = Rental income ÷ PITIA (Principal, Interest, Taxes, Insurance, Association dues). A DSCR above 1.0 means the property covers itself. Minimum down is typically 20–25%.
Yes. Refinancing can help you:
Most lenders want at least 6 to 12 months of payments on your current loan before you refinance, depending on the program.
An ITIN loan allows borrowers without a Social Security Number to qualify using their ITIN (Individual Taxpayer Identification Number). It's designed for buyers without traditional US documentation who want a path to homeownership. Documentation is flexible and traditional credit history isn't always required. Down payment is typically 15–25%.
A Foreign National loan is for international buyers investing in US real estate. No US credit is required — you qualify with foreign income or assets. It's ideal for investment properties or second homes. Down payment is typically 25–35%.
The typical process takes 2 to 4 weeks from accepted offer to closing day. Pre-approval itself takes 24 to 48 hours. Complex cases or Non-QM programs may take slightly longer because of the additional documentation review.
Plan for three main costs:
In some cases, sellers can contribute toward closing costs through negotiation — your agent helps structure that.