When should we start the mortgage application process?

After you’ve completed the Planning & Building Consensus stage, confirmed eligibility and viability, and decided it’s a go!

You can contact lenders earlier, but know:

• Loan Officers will give you greater mindshare if and when you’re prepared
• LOs will add you to their mailing lists
• LOs are salespeople

Do we need a 20% down payment?

No. Many mortgage products allow borrowers to put less than 20% down towards a purchase. Some government loans allow for little to no down payment, but eligibility is borrower and case-specific.

Sharing the details outlined in this section with your mortgage lender will help your loan officer guide you to the mortgage that best fits you.

What if we receive gifted funds from family or friends?

You need to document any gifts or loans from friends and family. Anyone involved must be fully aware: co-buyers, participating parties, and the mortgage lender. See the section above on Friends & Family for more details.

What’s the difference between a co-borrower vs. a co-signer?

A co-borrower is listed on the mortgage note as a party to the loan and often has an ownership interest, meaning they jointly hold Title to the property.

A co-signer is effectively a guarantor of the mortgage but is not a co-owner and does not participate as a Title holder.

Both co-borrowers and co-signers are joint and severally liable for the mortgage.

What’s the difference between mortgage prequalification versus preapproval?

These terms are fluid, but we’ll be concrete. Generally, prequalification is useless. It’s a “determination” from a mortgage lender about how much you can borrow and at what terms based on self-reported information.

Preapproval goes a step further. It provides a determination, albeit not final, from a mortgage lender about how much you can borrow and at what terms based on verified financial information from all co-borrowers. This carries more clout in your home search. For this reason, you want to get preapproval before starting your home search. Without it, you’re window-shopping.

How many people can be co-borrowers on a mortgage?

Technically, no limit is set by the GSEs or any other institution. Practically, it’s difficult for most residential mortgage lenders to process a loan application with more than five co-borrowers on a mortgage.

What if we want to co-buy a multi-family home (MFH)?

Getting a mortgage to co-buy a residential property of 1 to 4 units is feasible using traditional residential mortgage lenders. Above that threshold, you’ll probably need commercial financing. The lending criteria in a commercial scenario differ, and costs are generally higher, particularly for non-established landlords. Commercial real estate is beyond the scope of this course.

How long is financing approval good for?

Typically 90-120 days, with the caveats that:

• Rate locks vary and usually expire sooner
• Approval can expire earlier if the documents you submit to the lender are older

Your approval letter from the mortgage lender will specify further details.