Mortgage Readiness Score

You answer 10 questions about your mortgage preparedness covering down payment, income stability, FICO score, existing debt (DTI), bank statements, employment type, down payment source, affordability, documentation, and pre-approval status. Each scores 1 to 10. Your total benchmarks against the US first-time buyer average of 52 out of 100.

Above 70 means you are well prepared to apply with confidence. Between 45-70 means you are on track but have gaps to address. Below 45 means significant preparation is needed before applying, rushing an application risks a hard credit pull that lowers your score and a denial that shows in the CAIVRS database.

The minimum is 0% for VA, 3% for conventional HomeReady, and 3.5% for FHA. On a $400,000 home, moving from 5% ($20,000) to 10% ($40,000) typically saves $100-200 per month through lower PMI and LLPA pricing. First-time buyers can use down payment assistance programs through state HFAs, check your state housing finance agency.

Most lenders require FICO 620+ for conventional and 580+ for FHA with 3.5% down (500-579 FICO requires 10% down on FHA). Above 740 accesses the best conventional rates. Check your FICO and credit reports 6-12 months before applying, disputes take 30+ days to resolve and score improvements need months to reflect.

Fannie Mae requires a 2-year employment history but not with the same employer. W-2 workers in the same role with gaps under 6 months usually qualify. Self-employed applicants typically need 2 years of tax returns. Avoid changing jobs, bonus structures, or employers during an active application.

The most common rejection reasons: insufficient down payment, insufficient reserves, adverse credit (collections, charge-offs, late payments in past 12 months), high DTI (above 45-50%), large unexplained deposits (AML concerns), insufficient income documentation, appraisal coming in below contract price, and title issues. Most are fixable with 6-12 months of preparation.

A FICO score of 740 or above unlocks the best conventional mortgage rates. The spread between 640 and 760 can be 1-1.5% on a conventional loan which translates to $200-400 per month on a $400,000 mortgage. CFPB data shows mortgage applications denied at underwriting cost buyers an average of $400 in wasted fees so checking your score well in advance is critical.

Yes. A pre-approval letter shows realtors and sellers you are a serious, qualified buyer. It typically takes 24-72 hours through a lender, involves a hard credit pull, and lasts 60-90 days. In competitive markets, offers without a pre-approval are routinely rejected. Strong files can also request an underwriter-approved pre-approval which is nearly as strong as a cash offer.

US lenders use the 28/36 rule: housing costs should stay under 28% of gross monthly income and total debts under 36%. On a $75,000 salary ($6,250/mo), that caps your PITI at $1,750/month.

The minimum is 3% for a conventional Fannie Mae HomeReady loan, 3.5% for an FHA loan, and 0% for a VA loan if you are eligible.

Conventional (Fannie Mae/Freddie Mac conforming, 3-20% down), FHA (3.5% down with 580+ FICO, government-insured), VA (0% down for eligible veterans, no PMI), USDA (0% down in rural areas), jumbo (above $806,500 conforming limit, 10-20% down), and ARMs (5/1, 7/1, 10/1 fixed-then-adjustable).

A gross rental yield (or cap rate) of 6-9% is typical for US single-family rentals. Sun Belt and Midwest metros often hit 7-10% while coastal primary markets average 3-5% gross.

New construction typically carries a 10-20% premium over comparable existing homes. However, they come with builder warranties (1-year workmanship, 2-year systems, 10-year structural is common), Energy Star efficiency, and no immediate maintenance costs.