FAQs
At BWC, we believe knowledge is as valuable as a good pair of boots—it’ll carry you a long way. Buying a home is one of the biggest steps you’ll take, and we’re here to make sure you feel confident and in control every step of the way.
This FAQ page is your one-stop shop for answers to the questions we hear most. From understanding closing costs to tackling pre-approvals, we’ve got you covered. We’re all about giving you the tools and know-how to navigate the home-buying process with ease—because an informed buyer is an empowered buyer.
So, pull up a chair, take your time, and if you don’t see what you’re looking for, give us a holler. We’re proud to help you make your way to homeownership, Texas style—straightforward, friendly, and with a helping hand when you need it.
What is the difference between a fixed-rate and adjustable-rate mortgage? A fixed-rate mortgage has an interest rate and payment that stay the same over the life of the loan, providing stability and predictability. An adjustable-rate mortgage (ARM) has an interest rate that may change periodically, typically offering lower initial rates but with the potential for future increases.
How long does my pre-approval letter last? The standard pre-approval is typically valid for 120 days from the date your credit is pulled. If something material has changed, then we will need to look at your pre-approval again.
Do I need to put 20% down to purchase a home? No, a 20% down payment is not always required. Many loan programs allow for lower down payments, such as 3% to 3.5% for first-time homebuyers, and some programs, like VA loans, may offer options with no down payment. We recommend speaking with your loan officer to know what you qualify for!
When should I get pre-approved for a mortgage? It's recommended to get pre-approved 6 to 12 months before you plan to close on a home. Early pre-approval helps identify your budget and address any credit issues in advance.
What documents are needed for a mortgage application? Typically, you'll need your two most recent W-2s, two recent pay stubs, two recent bank statements, and a copy of your driver's license. Self-employed individuals may need to provide additional documentation, such as tax returns. Depending on your specific situation, we may need more documents. We typically ask for a copious amount of documents upfront so that your loan process goes as smooth as possible.
How can I best prepare for a mortgage pre-approval? Prepare the necessary documents and ensure your credit is unlocked with all three credit bureaus to facilitate a smooth pre-approval process.
How long does a pre-approval take? With all documents provided and credit scores accessible, a pre-approval can typically be completed within 24 business hours. We can move as fast as you can. Please note that we are open M-F 8am-5pm and will have limited access on the weekends.
What is an escrow account? An escrow account (also referred to as an impound) is an account for paying your property taxes and insurance premiums, along with any other charges, as part of your monthly mortgage payment.
How is my monthly escrow payment calculated? An estimated amount, based on the previous year’s payments and an adjustment for inflation, is divided by 12 and added to your mortgage payment.
How is my monthly escrow payment calculated? An estimated amount, based on the previous year’s payments and an adjustment for inflation, is divided by 12 and added to your mortgage payment.
Will my monthly escrow payment change? Yes, your monthly escrow payment can change based on adjustments in your property taxes and insurance premiums. This is can be very common when buying new constructions. We advise taking this into CAREFUL consideration when considering a new construction home.
What is mortgage insurance (MI)? Mortgage insurance is a policy that protects the lender in case of default, allowing them to approve a loan they might not have otherwise. MI can make buying a home with less than 20% down possible in most cases.
How does a lender determine how much I can afford? Lenders consider factors such as your debt-to-income ratio, cash available for down payment and closing costs, and credit history to determine your maximum loan amount.
What is an appraisal? An appraisal compares the current market value of the home you’d like to buy with other homes in the area that have recently been sold. A recent appraisal is necessary to confirm the property’s current value.
What is an interest rate lock? An interest rate lock is a guarantee that the interest rate you select for your mortgage loan will not change between the offer and closing, provided the loan closes before the rate expiration date.
What are closing costs? Closing costs are the fees and charges due at the closing of a real estate transaction. They can include origination fees, appraisal fees, credit report fees, and recording fees, among others.
What documents will I receive at closing? At closing, you’ll sign and receive copies of all legal documents that are recorded and filed for the property you’re purchasing. Additionally, you will receive information regarding your monthly mortgage payment and servicing information for your new loan.
What is the difference between a mortgage broker and a direct lender? A mortgage broker acts as an intermediary between borrowers and multiple lenders, offering access to a variety of loan products and terms. A direct lender provides loans directly to borrowers, often with in-house processing and underwriting.
Does it cost anything to use a mortgage broker? There is no upfront cost to you, the client. Mortgage brokers receive a commission from the lender if your deal is finalized. In the event special fees apply, these costs must be discussed and agreed upon in advance.
Does getting pre-approved for a mortgage require a credit check? Yes, getting pre-approved requires a credit check. This step allows us to determine exactly what you qualify for, identify any potential issues, and ensure you’re positioned for the best possible interest rate.
Will a credit inquiry hurt my credit score? While credit inquiries do impact your score slightly, the effect is typically minor—usually just a few points. Unless you frequently apply for new credit, this small impact won’t have significant consequences.
What are the benefits of having my credit checked during pre-approval? Accurate qualification: We can determine exactly what loan programs you qualify for. Address potential issues early: If there’s a problem with your credit, identifying it early gives us time to resolve it before it affects your interest rate or loan approval. For example, we’ve seen cases where small collections impacted a client’s interest rate unnecessarily because they weren’t caught early. Score optimization: We can provide recommendations to improve your credit score and help you qualify for the best possible interest rate. Peace of mind: Knowing your credit is in good shape allows you to shop for a home with confidence.
What if there’s a problem with my credit during pre-approval? If an issue is found during the credit check, we can work on resolving it right away. For instance, if there’s a small collection or an error on your report, catching it early gives us time to fix it before you finalize your loan. Addressing these issues proactively can save you money by ensuring you qualify for the best interest rate.
I’m still concerned about checking my credit. What should I do? It’s completely normal to have concerns about credit checks! For more detailed information, we recommend reviewing the Credit Score Booklet by Fair Isaac Corporation (FICO). Pages 8 and 11 specifically address inquiries and how they impact your score. We’re also happy to answer any questions you have to help you feel confident moving forward.
What is included in APR costs? APR (Annual Percentage Rate) costs reflect lender-associated fees that are part of the loan process. These may include: Pre-paid interest: The interest accrued from the date your loan closes to the end of that month. Admin fees: Administrative costs associated with processing your loan. Loan processing fees: Fees for reviewing and processing your loan application. Underwriting fees: Costs associated with evaluating your loan risk and approval. Document-preparation fees: Fees for preparing the necessary loan documents. PMI fees (Private Mortgage Insurance): If your down payment is less than 20%, PMI may be required.
What is included in APR costs? APR (Annual Percentage Rate) costs reflect lender-associated fees that are part of the loan process. These may include: Pre-paid interest: The interest accrued from the date your loan closes to the end of that month. Admin fees: Administrative costs associated with processing your loan. Loan processing fees: Fees for reviewing and processing your loan application. Underwriting fees: Costs associated with evaluating your loan risk and approval. Document-preparation fees: Fees for preparing the necessary loan documents. PMI fees (Private Mortgage Insurance): If your down payment is less than 20%, PMI may be required.
What is included in non-APR costs? Non-APR costs are fees not directly associated with the lender but still required as part of the home-buying process. These include: Title fees: Costs for title searches and issuing title insurance. Attorney fees: If an attorney is involved in the closing process. Notary fees: Charges for notarizing documents during the closing. Document-preparation fees by the closing agent: Costs for preparing legal and closing documents. Home-inspection fees: The cost of inspecting the property for structural and safety issues. Recording fees: Fees to record your property deed and mortgage with your local government. Credit report fees: The cost of pulling your credit report. Appraisal fees: Charges for evaluating the home’s value to ensure it matches the loan amount.
What are pre-paid costs? Pre-paid costs are expenses paid upfront to establish your escrow account and cover future taxes and insurance. These include: Escrow account setup: Typically includes three months of property tax reserves to ensure there’s enough to pay this year’s taxes. Insurance pre-payment: Includes 15 months of homeowners insurance, which breaks down as the first year’s premium plus an additional three months to establish the escrow account.
Why do I need to pay pre-paid costs upfront? Pre-paid costs are required to ensure your escrow account has sufficient funds to cover property taxes and insurance when they come due. This helps avoid shortfalls and ensures timely payments, providing peace of mind for both you and the lender.
Are closing costs fixed or do they depend on the home price or loan amount? Some closing costs are fixed, while others vary based on the home price or loan amount. Here’s the breakdown: Fixed costs (APR fees): Certain lender-associated fees, like the admin fee and underwriting fee, remain constant regardless of the home price or loan amount. Variable costs: Fees like escrow, insurance, and other non-APR costs can fluctuate based on the purchase price and loan amount. For instance, increasing or decreasing the purchase price typically adjusts the loan amount, which can, in turn, impact these costs.
Are the closing costs provided at the beginning exact? No, the initial closing costs you receive are estimates. Here’s what to expect: Estimated on the high side: Lenders often overestimate closing costs to avoid surprises later in the process. Adjustments throughout the process: As your loan progresses, the costs are refined, and they typically end up being lower than the original estimate. Why the estimate matters: It provides a general understanding of your potential costs so you can plan accordingly, even if the final numbers change slightly.
What factors can cause closing costs to change? Closing costs can adjust due to: Purchase price changes: Increasing or decreasing the home’s purchase price affects fees tied to the loan amount, such as escrow and pre-paid costs. Loan program changes: If you switch loan programs during the process, fees like PMI or lender credits may change. Final service provider selection: Title companies, attorneys, or home inspectors chosen by you or your lender may have slightly different fees than initially estimated.
Why am I getting so many calls after my pre-approval? When you apply for a mortgage, some companies purchase leads from credit bureaus when a credit check is performed. These companies use this information to market their services, which can result in unsolicited calls or emails. Unfortunately, this practice is allowed, and lenders have no control over it.
How can I stop unsolicited calls after a credit check? While stopping these calls completely may take time, here are two steps you can take to reduce them: Register your phone number on the FTC’s Do Not Call List: Visit donotcall.gov to opt out of telemarketing calls. Opt-out of pre-screened offers: Go to optoutprescreen.com to prevent your information from being shared for pre-screened credit and insurance offers.
Can lenders prevent these calls from happening? Unfortunately, lenders cannot control this practice, as credit bureaus are allowed to sell this information. We understand how frustrating this can be, and we’re here to help guide you through any concerns or issues.
How is credit evaluated when applying for a joint mortgage? When applying for a joint mortgage, lenders assess the credit scores of all applicants. They typically consider the "lower middle score," which involves: Reviewing each applicant's credit scores from the three major credit bureaus (Equifax, Experian, and TransUnion). Identifying the middle score for each applicant. Using the lower of these middle scores to determine loan eligibility and terms. This means that if one applicant has a significantly lower credit score, it can impact the mortgage terms offered.
What if my partner has a lower credit score than I do? In joint mortgage applications, lenders focus on the lower middle credit score between applicants. If your partner's credit score is lower, it could affect your loan terms, potentially leading to higher interest rates or stricter conditions. It's essential to discuss this with your lender, as some may offer options to mitigate the impact, such as excluding the lower score applicant from the loan or working to improve the lower credit score before applying.
Can we still get a joint mortgage if one of us has bad credit? Yes, it's possible to obtain a joint mortgage if one applicant has bad credit; however, the unfavorable credit score can influence the loan's interest rate and terms. Lenders assess the risk based on the lower credit score, which may result in higher costs over the life of the loan. It's advisable to consult with your lender about potential strategies, such as improving the lower credit score before applying or considering alternative loan options.
How can we improve our chances of getting approved for a joint mortgage? To enhance your prospects of approval and secure favorable terms: Improve Credit Scores: Both applicants should work on boosting their credit scores by paying down debts, making timely payments, and correcting any inaccuracies on credit reports. Manage Debt-to-Income Ratio: Aim to reduce outstanding debts to present a healthier financial profile. Save for a Larger Down Payment: A substantial down payment can offset credit concerns and may lead to better loan terms. Consult with a Mortgage Advisor: Seek professional advice to explore suitable loan options and receive personalized guidance. By taking these steps, you can strengthen your joint mortgage application and potentially secure more favorable terms.
What are the minimum credit score requirements for different loan types? FHA Loans: Minimum credit score of 580. VA Loans: No minimum set by the VA, but most lenders require 620. Conventional Loans: Minimum credit score of 620 for primary residences and 700 for investment properties. Jumbo Loans: Minimum credit score of 700.
How much can sellers contribute to closing costs? FHA Loans: Up to 6% of the purchase price. VA Loans: Up to 4% of the purchase price. Conventional Loans: Less than 10% down: Up to 3%. 10% or more down: Up to 6%. Investment properties: Up to 2%. Jumbo Loans: Up to 3%.
What is a 2-1 buydown, and how does it work? A 2-1 buydown is a mortgage agreement where the interest rate is reduced for the first two years: Year 1: Interest rate is 2% lower than the loan's full rate. Year 2: Interest rate is 1% lower. Year 3 onward: The full interest rate applies. This can make your initial payments more manageable. Sellers or builders often offer this incentive to attract buyers.
What are the typical closing costs for a mortgage? Closing costs usually range from 2% to 5% of the loan amount. For example: If your loan amount is $475,000, closing costs could be approximately $14,250 (3%).
What’s the difference between closing costs and cash to close? Closing Costs: Fees paid to the lender and third parties (e.g., title company, appraisers). Cash to Close: Includes your down payment, escrow account funds, and closing costs.
How much home can I afford based on my income? A good rule of thumb is to look for homes that are 3–4 times your annual gross income: $80,000/year income → $240,000–$320,000 home $150,000/year income → $450,000–$600,000 home Your debt obligations and down payment will affect this range.
What’s the 28/36 rule for debt-to-income ratio (DTI)? 28% Rule: No more than 28% of your gross monthly income should go toward housing costs (e.g., mortgage, taxes, insurance). 36% Rule: No more than 36% of your gross monthly income should go toward total debt, including housing, car loans, and credit cards.
What are some dos and don’ts during the mortgage process? Do: Get pre-approved early. Keep communication open with your loan officer. Don’t: Change jobs or quit your job. Make large deposits or transfers without documentation. Open or close credit accounts.
How can making extra payments on my mortgage help? Making one extra mortgage payment per year can significantly reduce the loan term. For example: On a 30-year loan, this could shave 7 years off your term and save you thousands in interest over time.
What qualifies me as a first-time homebuyer? You’re considered a first-time homebuyer if you haven’t owned a home in the past 36 months. Even if you’ve owned a home before, you may still qualify for first-time buyer benefits if it’s been three or more years.
What is the minimum I can put down? Down payment requirements vary depending on the loan program: FHA Loans: As low as 3.5% of the purchase price. Conventional Loans: As low as 3% with first-time buyer programs. VA Loans: 0% down for eligible veterans and service members. Jumbo: 10.01% down depending on investor and specific homebuyer scenario
Can I use gift money for my down payment? Yes, many loan programs allow you to use gift funds for your down payment. Your lender will require a gift letter that confirms the money is a gift and not a loan.
Should I hire a real estate agent? Yes, especially as a first-time buyer! A real estate agent can help you find the right home, negotiate offers, and guide you through the closing process. Their expertise is invaluable, and their services are typically paid for by the seller. We can connect you with an agent!