Basecamp 2 - What it Takes to Qualify for a Mortgage
“Owning a home isn’t out of reach. You just need the right plan, the right team, and the right guidance.” - Nelson Barss
Understanding Mortgage Qualifications
What You Need to Know Before You Buy a Home
Getting approved for a mortgage can feel complicated, but once you understand the main factors lenders look at, the process becomes a lot clearer. In this guide, we’ll break down what it really takes to qualify — including credit, down payment, income, and property requirements — and how to prepare, even if you’re not there yet.
The Three Cs of Mortgage Approval
Lenders evaluate every loan application based on three main areas:
Credit – Your history of borrowing and repayment.
Capacity – Your ability to afford the loan, measured by income and debts.
Collateral – The property itself, which serves as security for the loan.
Each of these plays a role in the overall decision. You don’t need a perfect score in every category — strong performance in one area can often offset weaknesses in another.
Credit: The Starting Point
Credit is one of the most common questions for first-time buyers. Minimum credit scores vary depending on the loan program:
FHA loans: Minimum 580 with 3.5% down (or 550 with 10% down).
Conventional loans: Minimum 620, though they’re more attractive for scores above 660–680.
Top-tier pricing: Begins around 740–780 for the best interest rates.
Credit scores matter because they directly affect your interest rate — and even small differences can change your monthly payment by hundreds of dollars.
It’s important to know that mortgage credit scores use older FICO models (versions 2, 4, and 5). These are different from the scores you see on apps like Credit Karma or your bank statements, which often use newer versions like FICO 8 or 10. That’s why your lender’s number might not match what you’ve been monitoring.
If you don’t know your score, you can check your reports for free at AnnualCreditReport.com, or have your lender perform a soft pull that won’t affect your score. Even if you’re just planning ahead, getting a professional review early helps you identify what to improve and how to qualify for the best rates.
How Mortgage Approvals Work
All mortgage programs — FHA, VA, Conventional, USDA — use automated underwriting systems. These computer-based algorithms assess risk and issue approvals or denials based on the data entered.
Underwriters don’t make subjective calls; they verify that the information is accurate. The system looks at “risk layers.” For example, a lower credit score can sometimes be offset by a larger down payment or strong income history. This is why it’s important not to count yourself out — there’s often flexibility when one area of your profile is strong.
Capacity: Income and Debt-to-Income Ratio
Your income determines your borrowing capacity, and lenders calculate this through your debt-to-income ratio (DTI).
The general rule: Your total monthly debt (including your new house payment) should be below 50% of your gross monthly income.
Student loans, car payments, and credit cards all count; utilities and cell phone bills don’t.
If you have deferred student loans, lenders usually count 0.5% of the balance as a monthly payment.
Not all income can be used equally. For example:
You usually need two years of work history to count new income.
College or trade school can count toward that history if it’s in your field.
Self-employed or commission-based income typically requires two full years of tax returns, and lenders use your net profit, not your gross revenue.
If your income varies or your taxes show heavy write-offs, there are still alternative loan options — such as bank-statement or profit-and-loss programs — but they often come with higher rates and down payments.
Nelson emphasizes that a solid pre-approval is critical. A rushed or inaccurate pre-approval can lead to loan denials late in the process, costing you time, money, and even your home contract. His process includes double-checking every guideline and offering a $5,000 pre-approval guarantee — if a loan is denied due to an oversight, he covers the costs.
Collateral: The Property Itself
The home you buy must qualify too. Lenders need to see that it’s livable, safe, and marketable — meaning it could be resold easily if needed.
Cosmetic issues (paint, flooring, etc.) are fine.
Major structural or safety problems require special renovation loans.
Condos and townhomes must have HOA budgets, insurance, and finances in good standing. If the HOA is unstable or in a lawsuit, financing may be denied unless a different loan type is used.
Down Payment: What You Really Need
The minimum down payment depends on the loan type:
Conventional: 3% for first-time buyers.
FHA: 3.5%, or 10% if your credit score is below 580.
VA loans: 0% down for eligible veterans and service members.
USDA loans: 0% down in qualified rural areas.
Many first-time buyers use down payment assistance programs such as Utah Housing or Chenoa Fund to bridge the gap. These programs can cover your down payment or closing costs, though they often come with higher interest rates or reduced purchasing power.
If possible, coming up with your own 3–5% down payment usually results in a better overall deal — lower rates, lower payments, and more flexibility. There are many creative ways to gather funds: selling a vehicle, using retirement savings, or receiving a gift from family (which many parents are open to, especially when they understand the long-term financial benefits of ownership).
And don’t fall for the “20% down myth.” You don’t need 20% to buy a home. That number only applies if you want to avoid mortgage insurance. For most buyers, waiting to save that much can actually make things harder, since home prices often rise faster than savings accounts grow.
Very few buyers have perfect scores in every area — and that’s okay. What matters most is having a plan. If one piece of your profile needs improvement, the right strategy can often bridge the gap.
With preparation, teamwork, and the right guidance, qualifying for a mortgage — and owning your first home — is entirely within reach.
Full Transcript
Utah Home Buyers Quest Podcast
Episode 3: What it Takes to Qualify for a Mortgage
Host: Nelson Barss
Well, hello, home buyers, and welcome to the Utah home buyers Quest podcast. This is episode number three, which is base camp 2, and we're going to cover mortgage qualifications. I'm Nelson Barss, I'm a mortgage broker and president of the Utah Independent Mortgage Corporation, and I've been helping people buy homes for over 20 years, and I'm so excited you're here. Thank you so much for coming, and I just want to commend you for taking another step towards your own home ownership. And I promise you that I will give you as much free and useful information as I can give you in every episode.
Today we're going to go over what it takes to get approved for a mortgage. We'll talk about credit and down payment, income and work history, and the property requirements, and we're going to keep it sort of high level. This is a base camp episode. In the future we're going to zoom in on all these topics, and we're going to talk about how we can overcome any obstacles that you may have in any one of these areas.
I just want to point out: if you don't meet every single criteria, it doesn't mean we can't get you approved. We'll talk some more about how this works, but it's not necessarily that you have to check every single box and get an A+ on every single item that we're going to talk about. Often there are quick things we can fix as well. If there is a box that needs to be checked, we can fix it. We can work together to change the situation.
Credit
First, let's start with credit. I think that's a really good place to start. Whenever I teach this topic as a home buying seminar in person, I get a lot of questions about credit. So what credit score is required? What's the minimum credit score to purchase a home? Well, according to the F, it's 500, and that's pretty low, and I don't know of any lender that would approve a 500 score FHA loan. There are many lenders who will approve 550, but they're going to require a bigger down payment. Usually at that level they're going to want 10% down, and the normal FHA loan is three and a half% down, and for that they're going to require 580 score.
You're going to get the best interest rates on FHA if your score is 640 or higher. Conventional loans require a 620 minimum credit score, but at that level FHA is probably going to work better for you. Conventional loans tend to be more attractive for those with good scores. They start to get really attractive once you hit that 660 to 680 threshold, and again the best case to do if you're in that situation is you're going to qualify for both. Let's put them both on paper and talk about the pros and cons so you can decide with all of the information in front of you what program is best for you.
Now, conventional rates, fees, and payments get more attractive as your credit score goes up, and the pricing is segmented into 20-point tiers or steps. So, 680 is going to earn you a little bit better pricing than 660, and then at 700 it's a little better. At 720 everything gets even better, 740 and so on, and the top tier is 780. That's a fairly recent change. It used to be 740 was the top tier, and now even if you have 760, you're not quite getting the very best pricing from the conventional loans.
Your credit score is such an important factor. It really does play a huge part in determining what your interest rate is, and you probably know this: interest rates are part of the monthly payment calculation, so a higher interest rate is going to lead to a higher monthly payment. It's very interesting—sometimes you will see the same home, and depending on the qualifications of the buyer, the monthly payment may be $200 a month more or less than the other buyer. So, credit is really important.
If you're monitoring your own credit, you can see what makes it go up and down as you live your life. Just keep in mind that the mortgage industry is way behind on this. We're still using FICO versions two, four, and five. We pull all three bureaus, and version two is old. It was released in 2003, so it's over 20 years old. All of these are considered mortgage-specific scoring formulas, and they're not the same formulas that you're going to see for other purposes. For example, if you have a car loan application, they're probably going to pull FICO version 8, and the most recent FICO version is version 10.
The reason I'm telling you this is because if you're monitoring your credit on your bank statements, you're probably seeing a FICO 10 score, something other than FICO 2, and so it's not going to exactly match. We pull, we're going to get a different credit score than what you've been monitoring, which is fine. It's still useful to monitor and understand the ups and downs and what makes your credit go. Credit Karma is the same way. Credit Karma is a great site—you can learn a lot, you can read and also watch your score over time—but they're using their own formula. It's not a FICO score at all.
If you don't know what your credit score is, I encourage you to find out. How do you do that? First, you can always check your own credit for free at annualcreditreport.com. That's where you can log in once a year with each bureau. So, there's three bureaus, so you could actually spread this out, do it three times a year. You can see the full report. You can see what's being reported about you on your credit report, but it doesn't come with a credit score. If you want a credit score, you're going to have to pay for your score directly from the bureau, and it won't be the mortgage score. It'll be a consumer score; it'll be a different FICO model than what we use. All of that is good and very viable, but I would say even better is if you let me pull it for you as a part of a loan consultation, because there's no charge for that. We usually start with a soft pull, which doesn't hurt your credit score, and it comes with lots of free advice and coaching from me.
Even if you feel like you're just starting to plan, I'd still love to help you with that. I'd still love to sit down and give us a starting point to see where your credit is and help you with some tips to see what you can do to improve your likelihood of getting approved and getting the very best interest rate that you can qualify for.
I'm not going to get too deep into credit tips here. We're going to have some dedicated episodes very soon during the first 20 episodes about how to fix ugly credit, how to establish a score if you don't have one, and lots of tips to raise your score fast. For now, it's just about the qualifications and understanding what credit score you need right now.
Why is credit score so important to the lender? They rely on it pretty heavily. They trust this score, and it's basically a numeric value of your risk as a borrower. In fact, they call it your risk score. A high credit score can overcome a lot of other deficiencies. If you have a debt-to-income ratio that's not quite great, if you don't have a lot of down payment, having a high credit score—they will give you a lot of benefit of a doubt for that. A low credit score all by itself can also get you declined. If it's super low, if it's too low for the program, it just flat out doesn't work, and we've got to work on fixing your credit.
How Approvals Work
As we go into this, I think it's important for you to understand that these mortgage approvals are all algorithm-based. So even if you're doing conventional, FHA, VA, any other loan type, they all use a computer-based automated underwriting system to determine if your file qualifies. The underwriters don't really make all the decisions. They don't make very many decisions at all. Mostly what underwriters do is verify the numbers that went into the algorithm.
The algorithm is going to look for risk layers. So, if you have bad credit, that's one layer of risk. It can be offset, depending on how bad it is, by some other factors. That's why I say don't count yourself out. We need to look at the whole picture, and more importantly, we need to submit your file to the system, and we need to see if you're getting a thumbs up or a thumbs down. We can do that over and over again. We can say, okay, it doesn't approve with the zero down, but if we have 3% down, are we getting a thumbs up? What about 5% down? What if we pay off this debt—are we going to get a thumbs up? We can submit over and over again, and we do that. I always do that during a pre-approval consultation with my clients.
Down Payment
Okay, I think that’s a really good segway into the next topic, which would be down payment. What is the minimum down payment required? Well, convention loans require 3% down for first-time home buyers. FHA is 3.5%, or like I said before, if you have really low credit under 580, they're going to require 10%. However, there are many ways for you to also borrow that down payment if you don't have it in your own resources.
For example, you can use a Utah Housing loan. This is a very common zero down program. You can get an FHA loan which requires 3.5% down, and you can get a down payment assistance loan that will cover the 3.5% down payment, and even beyond that it can cover some of your closing costs. Just know that if you do this, you're going to have a higher monthly payment, not just because you're borrowing more but because it's a program that comes with higher interest rates. Utah Housing also has a conventional version of this, so you get a conventional loan which requires 3% down, and then you can get a down payment assistance loan to cover that. All the Utah Housing Programs have different credit score requirements. The lowest credit score for any of their programs is a 620, and you'll get a much better rate if you can get a 660-credit score.
Like I mentioned, these programs—anything that's 100% financing—it's going to result in a higher monthly mortgage payment. This is true with all kinds of variations of the Utah Housing concept. We have some lenders who do the same basic thing as Utah Housing. Some of them will even give you this second mortgage that has no monthly payment, and it can be forgiven after three years of on-time payments, so it just goes away. One of those is called Chenoa, and there are many of them. The challenge is any of these programs always come with a higher interest rate, and what it really tends to do right now is it limits your purchasing power. We might say that you qualify for $450,00 purchase price if you are coming up with your own down payment, but if we're using zero down, which comes with higher rates and higher payments, you only qualify for 400. So, the zero down stuff—it's there, and we use it all the time for people, but it does have its downsides.
There are some zero down programs, however, that are a bit more attractive. For example, VA. If you're a veteran, if you've served active duty for 6 months or in the reserves for 6 years, you're eligible for a really great zero down loan program. It doesn't have any monthly mortgage insurance. It has very good interest rates. USDA is another zero down program. This is a loan for rural communities, so you have to be in Utah. You just can't do it along the Wasatch Front. You've got to go north of Willard or south of Spanish Fork, or out west towards Tooele, or like Morgan County up on the Wasatch Back qualifies as well.
There are some good zero down programs out there. There are some usable ones that will result in a higher monthly payment, and part of what I do is I'm going to show you all of these options and help you decide which one to go for—right? Which one's going to give you the best overall deal and lowest cost overall. I really think the sweet spot for a first-time home buyer is to focus on 3% down for a conventional loan or 3 and a half% for FHA. That opens up a lot of loan options for you, and the cool thing is there are a lot of other ways to come up with that 3% down payment that won't put you into a higher interest rate and a higher monthly payment.
I'll give you a few examples. We're going to go into this more in detail, but there are many buyers who have assets like vehicles that they can sell or retirement accounts that they can tap into to come up with that 3% down. Some of them are able to get a gift from family, and honestly that's worth a conversation. If you had a family member who understood that it's going to save you $300 a month and boost your net worth if they can help you with the down payment, you might find parents or grandparents who are willing to help, and maybe even do a little bit of an early inheritance or something like that. You might want to have them listen to episode two. We talk about the amazing financial benefits of owning a house, because I think more and more parents are starting to help out with down payment assistance for their kids in a way that doesn't drive the monthly payment up and make it almost impossible to get a house in our market.
There's also the option of borrowing the money from a non-mortgage place. Additionally, we're going to go over this a lot in this podcast, but many cities and counties and even the state of Utah have down payment assistance programs to help you. Most of them have to be paid back when you sell; they're not grants. You have to be careful with the word grant. This is a down payment assistance program. Virtually none of these have monthly payments involved. Some will give you $5,000. Some will give you $10,000. There are $220,000 options and even $50,000 options, and I don't want to get too specific in this episode, but believe me, we'll be diving in very soon. Even after you listen to these episodes, please know that we are here to help you find the ones that you are eligible for. Many of these down payment assistance programs—all of them—have income limits. They have asset limits, and some run out of money every year around January and don't get replenished until June or July. It would take a long time for you to research all of these, and we've already done that research for you. We can direct you to the ones that will work for you during our loan consultation.
This episode is brought to you by the Nelson bars lending team. With 20 years of experience and access to the best wholesale mortgage rates, you could choose no better guide for your home ownership Quest than Nelson. Call our office today at 801 923 2161 to schedule a personal loan consultation. Consultations are completely free, and a one-on-one conversation with an expert is far more valuable than a podcast or seminar. It's time to take action. It's time to start your journey. Call 801 923 2161 today. NMLS number 20517.
The 20% Down Myth
One question I get all the time about down payment is, what about 20% down? Doesn't everyone have to do 20% down? I thought that was the minimum. It's actually a really big myth. There are way too many people that believe that they aren't going to buy, they shouldn't or can't buy a house until they have 20%. It comes from the fact that you need 20% down to avoid monthly mortgage insurance. Mortgage insurance is an added part of your monthly payment that you're going to pay if you don't do a 20% down payment. Mortgage insurance can be as little as $50 a month, and it can be as high as 300 to 400 a month, and lots of people are scared of mortgage insurance and they'll advise you to avoid it. I don't necessarily feel that way. I mean, obviously if you can avoid it, you should, but there are very few first-time home buyers who can do 20% down payment. I don't think it's a reasonable goal for most people and waiting that long can really hurt you.
Imagine if house prices increase more than 20% in the same amount of time where you're trying to save up your 20% down. You actually typically lose ground trying to save as fast as the housing market can grow. It's not an easy race to win. We'll have some in-depth episodes about mortgage insurance very soon, but I just want to tell you, 20% down is a worthy goal if you can do it. I would say there are few people who can save like that or who have that much money in savings, and even the people who do, once they see the options with lower down payments, they're willing to pay a little bit of mortgage insurance in exchange for keeping some money in reserve, being able to furnish the home or yard or all those things that come when you buy a house.
In general, more down payment will get you better loan terms. It's just lower risk for the lender, and like I said before, it can offset a lot of problems. If you can't get approved with 3% down, maybe you can get approved with 5% down. If you can't get approved with 5% down, maybe 10% is the trick. Like I said, we just have to submit to the algorithm to find out exactly what's needed for you to qualify, and some of that can be down payment that can be used to overcome a lot of problems.
Income and Debt-to-Income (DTI)
How much income do you need to qualify? That's a tough question. It just depends on your debts and on the new home that you're trying to buy. What we do is we calculate your debt-to-income ratio, and we rely on that ratio to answer the basic question: can you afford the payments? The way it's calculated is simple. It's just a division problem. We put all your monthly debt payments on top of the dividing line, and we put all your gross monthly income on the bottom, and then we divide it, and they're looking to see that that number is below 50% in most cases. In other words, you could qualify to carry debt payments equal to 50% of your income.
At your pre-approval, we're going to reverse-calculate this. Given your situation, how much house payment can you qualify to carry? From there, based on the current rates, I can tell you how much house price you can qualify to buy, and then you can go out and start shopping. In the end, I'm going to give you a written pre-approval letter that says exactly that. It says, congratulations, you can buy a house up to X, and you're going to need that if you decide to submit an offer, because the sellers will always require a pre-approval letter. We're going to talk a lot more about this in the next episode where we overview the process.
For today, let's do some calculations. Let me help you calculate your debt-to-income ratio today. Grab a calculator or a pencil, and let's calculate your debt ratio. On top of the dividing line, we're going to put all your monthly debt payments. This will include your car loans, credit cards, and so forth. It doesn't include things like your cell phone plan or your utilities. It's just debts.
Now, what about student loans—we need to focus on student loans for a second. If you have student loans in deferral, we usually can't just ignore those payments. It used to be we could ignore them if you were in deferral, but now most likely we'll need to use 0.5% of the balance as an estimated monthly payment. There is some nuance here. If student loans are the obstacle, then I'd encourage you to talk to me, especially if you're a doctor or other profession with lots of student loan debts. There are some workarounds for student loans, but in general they're going to want to count 0.5% of your balance.
So, you've done that. You've added that with all your other debts, and you have all your monthly payments. Now let's add something for the house payment. That needs to be part of the top of the equation as well. Maybe start with $2,500 a month, and let's see where that puts us. One easy way to look at this is we now have a total number of debts. How much income do we need in order to qualify for that house? All you do is double that. The debt ratio can be up to 50%, so take all your debt, multiply it by two, and you'll know how much monthly income you will need to qualify. Or you can just put your monthly income on the bottom below the line and divide it, and if the answer is below 50%, you're probably sitting pretty. If it's over 50%, you either need more income or less debt.
I've got an episode coming on this exact topic—how to fix a debt-to-income ratio that's broken—so we can look forward to that.
Please be aware that not all of your income may be allowed in this formula. A big part of the voluminous mortgage guideline books focuses on different types of income and what can be counted, and the underwriter's job is to determine if it's stable and reliable income to count. For example, if you don't have at least two years of work history, your current job may not be able to be counted. I want to pause here and reiterate: so many people count themselves out because of this one guideline, and it's probably the easiest guideline to overcome. Work history gaps are usually fine. Even if your two years of work history is spread out over the last 10 years, we can usually make that work. Also be aware that college education or a trade school counts as part of your work history. As long as you graduate and go to work in your field, you probably already have the two years of work history that you need, even if it's day one and you're starting your new job. We've got lots of ways to make the case and get an approval even if your work history isn't perfect, so don't count yourself out on that.
What about self-employed people? Self-employed income and commission-based income is not as flexible as W-2 salary-type income. You almost always are going to need a two-year history of those types—variable incomes like commissions—and we're going to count your two-year average. Just because you started making good money a few months ago won't be enough to qualify you for a house. You've got to make that level of money consistently, or at least average it out to where it shows that you overall can afford the house payment for a long term. Self-employment income is going to be calculated off your tax returns. If you have a business, we're going to look at the bottom line on the tax return—your net profit—not the top line, your gross income. If you write off too much to save on taxes, you're going to hurt yourself when it comes to qualifying to buy a house.
There are other ways to qualify if you're self-employed and your taxes don't work. There are loans that use bank statements instead of taxes, or profit and loss statements that are signed by your accountant. 1099s work sometimes on other programs. But when we go to these alternative programs because your tax return won't work, you're going to have higher interest rates and higher down payment requirements than the conventional guidelines.
One thing I love to do for self-employed people is review your tax returns before you file them and talk over what this looks like for housing. You can make any changes before you hit submit on those if you need to.
Other examples of income guidelines that may come into play where we're trying to determine what the number is on the bottom of that equation and we're trying to find out if the underwriter will allow it: if you have two jobs, for example, you usually can only count one of them until you have a two-year history of working two jobs. It doesn't have to be the same two jobs, but that's a two-year threshold as well. If you work overtime, you also need a two-year history, and they're going to want to take that two-year average. It's even a little more complicated because the current year is very important. If it's declining in any way—or any of these variable income numbers are declining in any way—they're not going to average it in with last year if it was better. They're going to focus on the current year. They're probably going to get nervous and ask you to prove that it's stabilized and it's not going to keep declining, but we typically can only use the current year if it's lower than last year. There are all kinds of nuance with these guidelines, and when we calculate your debt-to-income ratio, my job at the pre-approval stage is to make sure we're only using qualifying income—income that the underwriter will agree to count for you. So there’s a lot to research there.
This is a place where honestly many pre-approvals turn into loan denials and disaster after the underwriter finally sees the file, and this emphasizes the importance of working with a good lender for pre-approval. The consequences of bad pre-approval, if you think about it, can be pretty severe. Obviously, the worst part is you don't get the house that you were hoping to move into, but usually you don't find out until you've already spent quite a bit of money. Maybe you've already turned in a notice that you're leaving your apartment, so you end up without a place to stay. You may have given a couple thousand of earnest money. You may have paid a couple thousand dollars in appraisal fees, inspections, and all the time that you've wasted out there hunting for houses—not just for you but your real estate agent—is all flushed down the toilet if your loan gets denied later in the process when the underwriter finally sees it.
By the way, there are other people too. What about your seller and their agents and the people that they were going to move on and buy from? Sometimes these homes get stacked up like dominoes, and if one closing gets canceled, it cancels two or three other closings, and it affects a lot of lives. You can understand why I choose to be very thorough and careful about pre-approvals. First of all, it's a disaster for you if it goes wrong, and also my reputation is really important. Realtors around here trust me, and if they get a pre-approval letter from me, I want them to know that it is solid and it's not going to fall apart. If I have any questions, I'm researching, I'm reading guidelines, I'm talking to underwriters. I'll submit the loan for underwriting before you even go out and start shopping for homes, because I need to make sure that you have a solid pre-approval before you waste your time.
I do a guarantee on my pre-approvals, which I'm not aware of anyone else who does that, but you'll get a written guarantee that says if your loan gets denied because I missed something or I didn't understand a guideline, then I'm the one who loses money. So, it's a $5,000 or less guarantee for any earnest money, appraisal fees, inspection fees that you might lose if I make a mistake. I can do that because I own my company. When I worked for other companies, they would never allow that. They would never put themselves on the hook like that.
Collateral (The Property)
Okay so we’re almost done here with this episode. But these are the main qualification parameters. They actually summarize it in three categories. They call it the three C's: credit, capacity—which is basically your income—and collateral. Does the collateral work for them? The property has to qualify too. The biggest thing to remember is that the home has to be not only good collateral, but it also has to be livable—safe for you to live in. It has to be in marketable condition so if there was a foreclosure and the lender needs to turn around and put it on the market, that can be done quickly without added expense to them.
It doesn't mean you can't buy a fixer upper. Ugly homes are fine. There's no guideline that says you can't buy a home that's got pink carpet or weird paint on the walls. But damaged homes are more difficult, and they need to be financed with a specific renovation mortgage, and I can help you with that. If that's your goal, we can actually fund the money required to renovate a home as long as you qualify to borrow that much.
Another place where we run into problems sometimes are townhomes and condos, which are very popular for first-time home buyers. Those are usually okay. However, the underwriter has to review the homeowners association—the HOA—and if that HOA is a mess, they won't finance the property. They're going to review the HOA's budget. They're going to review the insurance. They're even going to ask if they're in any lawsuits right now. Keep in mind, sometimes homeowners associations are just run by your neighbors—it's just a group of people—and sometimes they don't have adequate insurance or budgets. Sometimes homeowners associations will hit the homeowners with surprise bills, like emergency assessments, to fix the pool or the roof of the building or something like that, and if they have a history of doing that, then the lending guidelines may preclude that home from being financed.
If you find that you're trying to buy a condo that doesn't meet those requirements, there are other programs. We can move you to a different lender, a different guideline that doesn't require quite such strict qualifications for the condo, but you have to be aware that that comes with higher interest rates and perhaps higher down payment requirements.
Outro
Here at the end, as we wrap it up, I just want to reiterate there are very few buyers who show up at a pre-approval consultation and score A+'s across all these categories, and if you feel like you're struggling in one or more, that's not a reason to give up. In fact, it's even more reason to schedule a consultation with me, because I can show you how close or how far away you really are. I specialize in making game plans—winning game plans—to get you ready and to help you find success.
I'll end this episode by saying the same thing that I said in the last one: let me show you what every next step is until you realize your dream of home ownership. I will work to show you the most affordable way to do it and the soonest possible way, and I love what I do. Thank you again for listening, and let's do it again soon.