Frequently Asked Mortgage Questions

The first step is completing a loan application. You can begin your application through the Preferred Funding, LLC secure application portal. Once submitted, Sarah will review your application and follow up to discuss your goals, explain your program options, and outline the documentation that will be needed. Submitting an application does not commit you to any loan or program.

Prequalification is generally a preliminary estimate based on self-reported information without a formal credit review or document verification. Preapproval typically involves a credit inquiry and a review of income and asset documentation, providing a more reliable indication of your likely borrowing capacity. Neither prequalification nor preapproval constitutes a commitment to lend, and both are subject to satisfactory completion of the full underwriting process.

Down payment requirements vary significantly by loan program, lender guidelines, and individual borrower qualifications. Some programs may allow lower down payments for eligible borrowers who meet all other program requirements. The amount you put down can affect whether mortgage insurance is required, your loan terms, and your overall loan cost. Sarah can review available programs based on your specific situation and goals.

Credit score requirements vary by loan program and lender. Different programs establish different minimum credit score thresholds, and credit score is only one factor in the overall qualification assessment. Income, debt-to-income ratio, assets, and property type also influence the decision. A credit review is a standard part of the mortgage application process.

Commonly required documents include recent pay stubs, W-2 forms from the past two years, federal tax returns (particularly for self-employed borrowers), recent bank and asset statements, and government-issued photo identification. Additional documentation may be required depending on your income type, employment situation, and the loan program you are pursuing. Sarah will provide a specific documentation request list based on your application.

Timelines vary depending on the loan program, documentation readiness, underwriting volume, property appraisal scheduling, and other factors. Being prepared with complete and organized documentation before applying can help the process move more efficiently. Sarah will provide realistic timeline expectations based on your specific situation.

Closing costs are fees associated with completing the mortgage transaction. They typically include origination and lender fees, title insurance, escrow and settlement charges, appraisal fees, prepaid property taxes, and homeowners insurance premiums. Closing costs vary by location, loan program, and other transaction factors. Your Loan Estimate will provide a detailed breakdown of anticipated costs.

In some cases and with some loan programs, certain closing costs may be financed into the loan balance rather than paid at closing. Rolling costs into the loan increases the total loan amount and the total interest paid over the life of the loan. Whether this option is available depends on the specific program, lender guidelines, appraised property value, and loan-to-value limits.

Gift funds from qualifying family members may be acceptable for down payment and closing costs depending on the loan program and lender guidelines. Gift fund requirements typically include a signed gift letter confirming that the transferred funds are a gift and not a loan that must be repaid. Program-specific documentation and source-of-funds rules apply. Not all fund sources are eligible under all programs.

Mortgage insurance is protection for the lender in the event of borrower default. For conventional loans, private mortgage insurance (PMI) is typically required when the down payment is below 20 percent of the purchase price. FHA loans require mortgage insurance premiums regardless of down payment amount, with both an upfront premium and an annual premium in most cases. VA loans do not require private mortgage insurance. Requirements and costs vary by program.

An appraisal is an independent assessment of a property market value conducted by a state-licensed or certified appraiser. Lenders require an appraisal to confirm that the property value supports the loan amount being requested. The appraised value determines the loan-to-value ratio, which affects loan eligibility, program qualification, and potentially mortgage insurance requirements.

Underwriting is the process by which the lender thoroughly reviews your complete loan file — including your credit history, income documentation, asset statements, employment verification, and property appraisal — to arrive at a final loan decision. The underwriter may request additional documentation or written explanations for specific items during this process. Underwriting is a standard and required step in mortgage approval.

Self-employed borrowers can qualify for mortgage financing, though documentation requirements are typically more extensive than for salaried employees. Lenders generally require two years of complete federal tax returns, a current profit and loss statement, and potentially additional business documentation. Income is calculated using the net income reported on tax returns after business expenses, which may differ significantly from gross revenue or deposits.

Student loan debt is included in your debt-to-income (DTI) calculation as a monthly obligation. How student loan payments are counted can vary by loan program — particularly for borrowers enrolled in income-driven repayment plans. Depending on your complete financial picture, student loans do not automatically disqualify a borrower, but they are a factor in the overall qualification assessment.

A rate lock is a lender agreement to hold a specific interest rate for a defined period while your loan is being processed. Rate lock periods, associated fees, and extension policies vary by lender and program. If your loan does not close before the rate lock expiration date, the locked rate may no longer apply and current market rates would be used instead.

There is no universal answer. Refinancing may be worth exploring when you want to change your loan terms, access available equity for a specific purpose, or remove mortgage insurance when eligible conditions are met. Whether refinancing makes financial sense depends on your specific loan, goals, the associated costs, and your anticipated timeline for keeping the property. Refinancing may increase the total finance charges paid over the life of the loan.

No. Submitting a loan application does not guarantee approval. Loan approval is subject to a complete review of your credit history, income, assets, employment, property eligibility, and applicable program requirements. An underwriter makes the final lending decision after reviewing the complete loan file. Preapproval is not a commitment to lend.

Loan servicing — which includes managing your monthly payments, escrow account, and ongoing loan administration — may be retained by Preferred Funding, LLC or transferred to another qualified servicer after closing. Federal law requires written notice to be provided if your loan is transferred to a different servicer. Servicing transfers are a normal and regulated practice in the mortgage industry.