> ## Content Index > Fetch the complete content index at: https://www.mortgagemomradio.com/llms.txt > Use this file to discover other available public pages before exploring further. # How to Buy a House Step by Step: The Complete Home Buyer Workshop - URL: https://www.mortgagemomradio.com/how-to-buy-a-house-step-by-step-the-complete-home-buyer-workshop/ - Published: 2024-03-06T21:00:00.000Z - Updated: 2026-09-04T17:27:37.000Z - Description: Debbie's full two-hour home buyer workshop, start to finish: the vocabulary nobody explains, FHA vs. conventional vs. VA vs. USDA, the 2% closing-cost rule, exactly which documents a pre-approval needs, how to shorten contingencies to compete, and the three-day closing disclosure rule. - Author: Deborah Marcoux - Tags: Podcast, Mortgage Mom Radio, #episode-backfill Mortgage Mom Radio • “Mortgage Mom Radio Homebuyer Workshop 2024!” • Live home buyer workshop from Wednesday, March 6, 2024 • 2 hours 8 minutes • Hosted by Debbie Marcoux, NMLS #237926 This is Debbie's full home buyer workshop — her first since 2022, and the first one she streamed — taking a buyer from the vocabulary through the loan programs, the pre-approval file, choosing an agent, writing the offer, and the closing table. It ran just over two hours because she stopped after every section to answer questions from the audience live. If you have never bought a house and you want the whole process in one sitting, this is it. ## Key takeaways - **An appraisal is not a home inspection.** The appraiser is assigned at random through a system — you don't get to pick one — and works for the lender, valuing the property. The home inspector is *yours*: you choose them, and they're the one checking the roof, the plumbing, and the attic. An appraiser will flag something blatant (a ceiling stain reads as a possible roof leak) but is not there to inspect. - **Budget about 2% of the sales price for closing costs, on top of your down payment.** On a $500,000 purchase that's roughly $10,000\. Closing costs cannot be financed — but they can be covered by a seller credit you negotiate into the offer, or by a lender credit. The single most common thing Debbie sees in buyers sent to her mid-escrow: they saved the 3.5% and nobody told them about the other 2%. - **The loan program follows you, not the other way around.** FHA is 3.5% down with a 580 minimum score, the same mortgage insurance premium for everyone, and much shorter waiting periods after a bankruptcy, foreclosure, or short sale — she calls it the do-over loan. Conventional starts at 3% down for first-time buyers (5% otherwise), needs 620 minimum but really wants 660–680, and prices its mortgage insurance to *you* — score, down payment, debt ratio, property type — so sometimes it beats FHA and sometimes it doesn't. - **Removing PMI takes principal, not appreciation.** On a conventional loan you request removal once you owe 78% of the *original* value — a higher appraisal today does not do it by itself, and most servicers that entertain a new appraisal also ask what improvements you paid for. On FHA with a minimum down payment, mortgage insurance is for the life of the loan; the only exit is a refinance. - **Buy small, then keep it.** Debbie's ladder: buy the one- or two-bedroom condo that fits you now, live in it, then buy the next place as another owner-occupied purchase and rent the first one out. Every step keeps primary-residence rates and 3–5% down payments, instead of the 20–25% down an investment-property loan demands. - **Contingencies are where you compete, not the price.** Appraisal, loan, and physical inspection contingencies typically run 17–21 days. Shortening them to 7–10 days makes an offer far more attractive without waiving protection — and a 7-day appraisal is genuinely doable, sometimes with a rush fee. The legal floor on any closing is 7 business days from disclosure; 14 days start to finish is realistic when everyone moves. - **Your closing disclosure has a three-business-day fuse.** Loan documents cannot be issued until three business days after you sign the CD. Debbie sends hers about ten days before the closing date — so if you're closing on the 31st and nothing has landed in your inbox by the 24th or 25th, start making phone calls. - **The pre-approval file is deliberately heavy.** One month of pay stubs, two years of W-2s, the final pay stub from each of the last two years, two months of bank statements, driver's license, and for retirement funds the most recent quarterly statement plus the terms and conditions of withdrawal. Self-employed adds two years of returns, business returns if you own 25% or more, and a year-to-date profit and loss. Asking for it all up front is how she keeps underwriting conditions from landing on you in the middle of escrow. ## Chapters - 01:00What this workshop covers, and how to ask questions - 05:00Buzzwords: appraisal vs. inspection, escrow vs. escrows - 13:00Q&A: removing PMI from a loan you already have - 16:00The benefits of home ownership - 22:00Q&A: how assumable mortgages actually work - 25:00Your responsibilities as an owner - 31:00How to decide which loan program fits you - 38:00FHA: 3.5% down, credit tiers, and the do-over loan - 47:00Conventional: 3% down, and mortgage insurance you shop for - 1:01:00VA: zero down, no mortgage insurance, assumable - 1:10:00USDA: rural areas, zero down, income limits - 1:12:00Closing costs: budget 2% of the sales price - 1:21:00Pre-approval: exactly which documents you need - 1:28:00Choosing a real estate agent who works for you - 1:36:00Writing the offer: earnest money and contingencies - 1:46:00In escrow: disclosures, and the three-day closing rule ## Questions answered at this workshop ### “Is there a way to get rid of PMI on a home I already own — and doesn't that take forever?” On a conventional loan, yes: once you've paid the balance down to 78% of the original value — the purchase price, or the appraisal if it was a refinance — you can ask the servicer to remove the mortgage insurance, and in that case a new appraisal usually isn't required. What does *not* work is pointing at appreciation. Some servicers will look at a new appraisal, but nearly every one Debbie has dealt with then asks what improvements you made and what you spent, because they want to see money went in. Paying down to that mark on minimum payments can take years, so if your value has climbed significantly, a full refinance with a new appraisal is usually the faster route. On FHA, mortgage insurance runs for the life of the loan except in a narrow case requiring a large down payment and a 15-year term — so for a 3.5%-down FHA buyer, the only way out is to refinance. ### “How do you strategize to get an assumable mortgage — and is it worth it?” Worth it when you can find one, because you inherit the seller's rate. VA loans are assumable, but many veterans won't do it: letting a buyer take over the loan keeps their entitlement tied up, so they can't turn around and use their VA benefit on the next house. On the conventional side, a 30-year fixed is not assumable and doesn't even have the language in the paperwork — the assumable ones are typically adjustable-rate mortgages. And the part people miss: you still have to cover the seller's equity. If they bought in 2020 or 2021, the home is worth considerably more than the loan balance, and you bridge that gap in cash. Assuming a loan is not walking in for free. ### “How soon after closing can I refinance to take advantage of a lower rate?” There are no prepayment penalties allowed on an owner-occupied mortgage — any program, VA, USDA, jumbo, conventional, even an alternative-documentation loan. Technically you could close today and apply tomorrow. The limit is economic, not legal: refinances are never free. When rates fall you'll hear “no-fee refi” advertised everywhere, and the fees are simply built into the rate instead of the paperwork. Refinance when the savings clear the cost, not the moment you can. (Prepayment penalties do exist on some investment-property and non-qualified mortgage products.) ### “I have an FHA loan. What do I need to buy a second property as an investment?” Investment purchases require a minimum of 20% down, and most products want 25% — at 20% the rate is significantly worse. Which is exactly why Debbie steers people the other direction: instead of buying investment property, buy your next home as an owner-occupied purchase at 3–5% down, move into it, and rent out the one you're leaving. Do that a few times and you've built a portfolio at primary-residence rates and primary-residence down payments. The intent has to be genuine — you move in and stay until you're ready for the next one, not a month. ### “Is it true that if you haven't bought a home in five or more years, you count as a first-time buyer again?” It's three years, not five. If you have not been on the title of a property for at least three years, you're considered a first-time home buyer again — which matters because that's the gate on 3%-down conventional programs and most down payment assistance. ### “I'm starting a business. How long do I have to be self-employed before that income counts?” For the full-documentation programs covered in this workshop — FHA, conventional, VA, USDA — you need two years of filed self-employed tax returns before that income can be used to qualify. There are alternative-documentation options, like a bank statement loan that calculates income from deposits over the last 12 to 24 months, and Debbie has access to versions advertised at 10% down. She won't put anyone in those: the rates are ugly enough that realistically you want 20% down before an alternative-doc loan makes sense. ### “My employer will forgive my student loans eventually. Should I wait to buy until that debt is gone?” If you can qualify today, with those payments in your debt ratio, for a home that genuinely works for you — buy it. Debbie is not telling anyone to buy a shoebox; she's saying that if what you qualify for now is sufficient, waiting costs you appreciation you can't get back. Then when the loans are forgiven and your monthly cash flow opens up, that money goes to savings for the next place. If the student loan payment is what's keeping you from qualifying for something that actually fits your family, that's the case for waiting until it's resolved. ### “Is it smarter to pay a little extra every month, or one extra payment a year — or to invest the money instead?” Extra monthly and one extra payment a year are mathematically the same thing; both accelerate the loan and cut total interest. The old rule of thumb she's heard throughout her career is that one extra payment a year takes roughly eight years off a 30-year note — the exact number depends on your balance and rate, and she'll run the amortization for you. Whether to do it at all is a genuine preference: some people want the house paid off by retirement more than anything, others would rather put the money where they believe it earns more. Debbie won't tell you which is right — that's your financial strategy, not a mortgage question. ### “Who besides the veteran can qualify for a VA loan — can a relative use it?” No. The veteran qualifies, and if they're married, the veteran and their spouse can be on the loan together. The only case where VA eligibility passes to someone else is a surviving spouse, and only where the veteran was deemed fully disabled from something that happened while serving. It doesn't transfer to a relative, and it doesn't transfer just because someone passed away. ### “Can closing costs be paid by a family member as a gift?” Yes. On a primary residence or a second home, gift funds can cover the down payment and the closing costs — not a problem. Investment property is the exception; gifts don't work there. ### “Do I really have to prove where my savings came from?” Yes, for any deposit worth 50% or more of your monthly income. If you earn $10,000 a month and a $5,000 deposit shows up on the statement, you'll be asked to source it — a bill of sale and a copy of the check for the car you sold, that kind of thing. And cash in a safe at home cannot simply be walked into the bank once you're under contract: if the deposit appears on the statements and you can't source it, that money can't be used. If you're planning to buy in a few months, get it deposited well before the statements matter. ### “What is Mello-Roos?” A way of financing the improvements a new area needs — schools, streets, street lights — charged as an additional tax folded into your property taxes. You see it most often on new construction in previously undeveloped areas. California property taxes typically run about 1.25% of the sales price; Debbie has seen new-construction areas where Mello-Roos pushed that to about 2.25%. That's a large difference in the monthly payment, and because you qualify on the total payment, it's a large difference in how much house you qualify for. If you don't want to pay it, tell your agent to only show you properties without it. ### “Can you refer me to a home inspector in California?” Honestly, no — and she explains why. The lender orders the appraisal; the home inspection sits with you and your real estate agent, who meets the inspector at the property and tracks the contingency deadline. Your agent is the right person to ask for that referral. Real estate agent referrals are a different story: Debbie works in many states and is glad to hand you off to someone she's closed deals with, and gets nothing in return for it. ### Ready to start — or just want to know what you'd qualify for? Call [844-935-3634](tel:8449353634) (844-WE-LEND-4), [start an application](https://www.mortgagemomradio.com/apply/), or run your numbers with the [mortgage calculators](https://www.mortgagemomradio.com/tools/). Get the weekly rate rundown in the [newsletter](https://www.mortgagemomradio.com/newsletter/). Full transcript (lightly edited for clarity) *Auto-generated captions cleaned for readability. Repeated housekeeping has been trimmed; licensing information appears at the bottom of this page. The workshop had an audio dropout over the first slide, which Debbie recaps live at the start of this transcript.* ### Welcome, and how this workshop runs Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, the Mortgage Mom, and this evening we are doing the home buyer workshop. I want to invite all of you to put your questions into the chat — I'll read them out loud and answer them. One note: you can't post in the chat unless you're subscribed to the channel, so subscribe to Mortgage Mom Radio if you haven't. This is going to be a longer workshop, because we're taking you from start to finish through the process. I pre-recorded the slides on purpose. My last workshop ran about three and a half hours because questions came in while I was presenting, and nobody wants to sit on YouTube for three hours. So the slides are tight and direct, and I come back live after every single one to answer whatever you've put in the feed. Keep them coming — the more questions I get, the more information I deliver. ### The phone app, and why online calculators mislead you I'm sorry about the audio on that first slide — here's what you missed. When you're at an open house, or scrolling Zillow or Redfin, the payment calculators on those sites are not giving you the whole payment. They're not calculating conventional mortgage insurance, or the FHA mortgage insurance premium, or the VA funding fee that gets financed in if you're not a disabled veteran, or the USDA financing fee. Our app does, along with taxes and insurance. Text us and you'll get a link back; click it, save it to your home screen, and it's there as the Mortgage Mom Radio app — calculators, the ability to apply, contact us, call us, watch YouTube. And if you don't know what to enter for taxes, insurance, or the interest rate, use the “email Debbie” button in the app and I'll give you the numbers to plug in. ### Real estate buzzwords There are so many words in this transaction that it can feel like someone is speaking a different language to you. I won't define all of them out loud — this workshop lives on YouTube, so you can pause on the slides and read the full list — but let me hit the ones that confuse people most. **Appraisal versus physical inspection.** These are not the same thing. The appraisal is ordered by your lender through a system that randomly assigns the appraiser — we don't get to pick, and you can't shop for your own to save money. The appraiser is evaluating value, because the bank wants to know it isn't lending you more than the home is worth. Your physical inspection is yours: you choose the inspector or contractor, and they look the house over — the roof, the appliances, plumbing leaks, mold up in an attic. Home inspectors aren't required to carry a license; it's good if they do. An appraiser will note something blatant — stains on a ceiling become “appears to be an active or prior leak, recommend a roof certification” — but that's flagging, not inspecting. **Escrow, and then escrows.** Same word, two completely different meanings. An escrow company is a neutral third party that takes direction from everyone in the transaction — buyer, seller, both agents — and makes sure things happen the way the contract says. Most of the West Coast is escrow country: California, Nevada, Arizona, Texas. Some states are attorney states — Illinois, for example — where buyer and seller each have an attorney instead. There are also title states where the title company handles everything; a title company issues title insurance in any of those setups, and can also act as the escrow party. Then there are *escrows* or *impounds* in your mortgage payment: the portion covering your property taxes and homeowners insurance. Loan officers tend to say impounds; your mortgage statement will usually say escrows. **Mortgage insurance.** Completely separate from homeowners insurance. Homeowners insurance is your fire insurance, plus earthquake or flood coverage if you need it. Mortgage insurance compensates the *lender* if you stop paying and go to foreclosure, and it's required on any loan with less than 20% down — and on FHA even with a large down payment. FHA calls it a mortgage insurance premium; most other loans call it PMI. A few more you'll hear as abbreviations: HOA for homeowners association, LO for loan officer, LE for the loan estimate you'll receive, LTV for loan to value. And the *prelim* — short for preliminary title report — which pulls everything recorded against the property: the seller's mortgage, a home equity line behind it, a mechanic's lien from an unpaid bill, an IRS lien. Your lender requires all of those to be satisfied so title is free and clear before closing. ### Q&A: getting rid of PMI Laura asks whether there's a way to remove PMI on a home she already owns. It depends on the loan. On a conventional loan, once you've paid the balance down so you have 22% equity — you owe 78% of what the property was worth at the time of that transaction — you can request that the lender remove the mortgage insurance and keep the loan you have. Here's what trips people up: it isn't about appreciation. Almost everyone's home has gone up in value, even with rates high — there are pockets that have seen declines, but for the most part values rose. You can't simply be worth more. You have to have paid the balance down to that 78% mark measured from the original sales price, or the original appraisal if it was a refinance. Michelle follows up: doesn't that take a long time, and don't you have to pay for another appraisal? It's actually the servicer — the company collecting your payment — that sets the requirements. If you've genuinely paid the balance down to the 22% equity mark, they don't have to order a new appraisal. Some servicers will allow a new appraisal to be used instead, but nearly every one I've dealt with then asks whether you've made improvements and what you spent, because they want to see that money went into the property to make it worth more. And yes, on minimum payments it can take a very long time. If your property has appreciated significantly, you're better off doing a full refinance with a new appraisal and removing the mortgage insurance that way. On an FHA loan, mortgage insurance is for the life of the loan. There are very few exceptions, and they require both a substantial down payment and a 15-year term — which is not what someone getting in at 3.5% down is doing. So on FHA you refinance to remove it. ### The benefits of home ownership Why own? First, building wealth. A lot of people lived through 2007, 2008, 2009, 2010, when values massively declined, and it left a mark. Remember the market is cyclical: values go up, they come down, they go up again — and they always end up higher than they landed last time. Each peak is higher than the peak before. Real estate is a long-term investment, and if that's the mindset you hold, the dips don't frighten you. Second, tax savings. You can write off the mortgage interest you pay and your property taxes — your 1098 at the end of the year shows both — and as of right now, under the current administration, mortgage insurance is deductible too if you don't have 20% equity. Third, security. Nobody leaves a note on your door with a 30-day notice. Nobody decides to sell out from under you while your kids are in a school district. As long as you make your payment, this is yours. Fourth, pride of ownership. You replant the yard, paint the walls, change the flooring, put an anchor in a wall — things you couldn't do as a tenant. And fifth, credit. If you've never had a mortgage, adding one to your credit report and paying it on time month after month will lift your scores. ### Q&A: assumable mortgages Rolando asks how to strategize toward an assumable mortgage, and whether it's worth it. Assumables are fabulous in a market like this one, where rates are higher than they were. If a seller's mortgage is assumable under their original paperwork, you can step into their loan at their interest rate — imagine taking over three and a half or 4% when today's rates are in the sixes. Not every mortgage is assumable. VA loans are. So if you're buying from a veteran who used their eligibility on that house, you could assume the loan if they're willing — and a lot of them aren't, because letting you take it over doesn't free up their eligibility to go finance the next home with VA. On the conventional side, a 30-year fixed Fannie Mae loan is not assumable; the language isn't even in the paperwork. The conventional loans that are assumable are typically adjustable-rate mortgages. And here's the piece people miss. You will almost certainly need cash for the seller. If they bought in 2020 or 2021, the property is worth more today than their loan balance — they are not going to hand you the loan and walk away from their equity. You have to bridge that gap in cash. Unless you find a corner of the country where values slipped, assuming a loan is not a free walk-in. ### Q&A: tax implications of selling a rental to buy a primary Chad asks about the tax implications of selling a rental property to purchase a primary residence. That one belongs to your CPA, not to me. It depends on how long you've owned it, how much depreciation you've taken, what you put into the property, and what income you earned on it. Your CPA has filed those returns and knows all of it — it's a math calculation, not a quick answer, and I'm not a CPA. ### Q&A: how soon can you refinance? Chad also asks how soon after closing you can refinance to take advantage of a lower rate. There are no prepayment penalties on any owner-occupied mortgage product — VA, USDA, jumbo, conventional, even alternative-documentation loans like a bank statement product. So technically you could close and apply again the next day. That doesn't mean you should refinance a hundred times. Refinances are not free. When rates come down you'll hear a lot of “no-fee refi” advertising — there are always fees; they're either loaded into the interest rate or they're on the paperwork. We don't refinance unless you're saving more than it costs you. (Some investment-property and non-qualified mortgage products can carry prepayment penalties, but not owner-occupied.) ### Responsibilities of ownership — #adulting Now the other side of the ledger. You have to make your mortgage payment on time. Most landlords don't report rent to the credit bureaus, so a late rent payment doesn't show up. A mortgage payment 30 days or more late hits your credit report immediately, and one 30-day late can drop a score by 80 points or more. You're responsible for the property taxes and the insurance. Most of my clients, especially first-time buyers, impound them — taxes and insurance collected inside the monthly payment. If you have 10% down or more on a conventional or jumbo loan you can choose to pay them separately; FHA and VA require impounds regardless of down payment. But if you pay them yourself and you miss them, you can lose the property. And if an insurance policy lapses and the home burns down, you own a mortgage and no house. Repairs and maintenance are yours now. There's no landlord to call about the refrigerator or a broken pipe, so keep a separate account for the unexpected. And if there are HOA dues, stay current: a homeowners association can foreclose on you. ### Choosing a loan program We're covering FHA, conventional, VA and USDA today. Jumbo and bank statement loans are real options — if you're buying above county loan limits, or you're self-employed and can't show returns — but those are a one-on-one conversation, not a workshop topic. Which program fits you depends on your credit score, how much you have for a down payment, what type of property you're buying, where it is, and whether it's a primary residence or an investment. FHA allows a lower credit score than conventional. VA requires that you're a veteran, and gives you zero down. There are conventional loans at 3% down and FHA at 3.5%, which is exactly where people ask me which one they want — and the answer comes out of your situation. ### FHA FHA is 3.5% down. Loan limits in high-cost areas go up to $1,149,825, and the limit varies county by county — Ventura County in California isn't the top number, but it's well above the roughly $644,000 you'd see in Riverside or San Bernardino, which aren't high-cost areas. In a high-cost county that means a sales price around $1.2 million with only 3.5% down. You can also refinance with FHA, which a lot of people don't know, with cash out to 80% of value. The monthly mortgage insurance premiums are good — they were lowered in 2022 and are now genuinely competitive with conventional — and on average FHA interest rates run lower than conventional. FHA is especially good if your credit score is lower. The rate is roughly the same for all FHA borrowers until you drop below 620; below that it climbs. We can do a loan as low as 550, but the rate gets really ugly, so 580 and above is the range I put on the slide. It improves at 600, again at 620, again at 640, and from 640 up everyone gets essentially the same rate. Everyone also gets the same mortgage insurance premium, which is different from conventional and makes FHA's mortgage insurance more predictable. I call FHA the do-over loan, because the credit guidelines are more lenient — collections, a prior bankruptcy, a foreclosure, a short sale. The waiting periods are much shorter than conventional. With a Chapter 13, where your debt is reorganized and you're making payments, if we can show 12 months of on-time payments and the court gives permission, you can buy or refinance while still in the bankruptcy. With a Chapter 7, if there were extenuating circumstances you can finance one year from the discharge date, and if it was financial mismanagement, two years. One myth to kill: FHA is not only for first-time buyers. Anyone can use it. You generally can't hold two FHA loans at once, though there are exceptions to that too. ### Conventional Conventional, conforming, Fannie Mae, Freddie Mac — all the same thing. FHA is a government program; this isn't, so the guidelines are different. Minimum down payment is 3%, and most of the 3%-down programs are first-time buyer programs. There are one or two that don't require first-timer status but don't allow you to currently hold financed real estate. If you've owned before, conventional usually wants 5% down. Unlike FHA, conventional mortgage insurance is priced to you — it works more like shopping for car insurance. The premium depends on your debt-to-income ratio, credit score, down payment, and property type: condo, single family, two-unit, three- or four-unit. With a 740 score, 10% down, a low debt ratio, a single family home, and more than one borrower on the application, that premium can come in cheaper than FHA. Plenty of other times FHA still wins. That's the conversation we have with you. Conventional shines on condos, because the complex doesn't have to be FHA-approved. It also allows a first-and-second combination — 10% down, an 80% first, and a 10% second to avoid mortgage insurance. That was very popular ten to fifteen years ago and less so now, because rate sheets price in an increase when you introduce a second lien, and one 90% loan with mortgage insurance usually beats two loans. Where it still earns its keep is bridging into a jumbo price range when you don't have the 20% a jumbo would demand. High-cost conventional limits also reach $1,149,825 in places like Los Angeles County, Orange County, and parts of Hawaii, and every county has its own number. Above the standard conforming limit for your county you need 5% down, not 3% — but the guidelines are still more lenient than a jumbo loan: lower credit scores allowed, and lower or no reserves. Minimum credit score is 620, but the rate at 620 is really ugly. I want conventional buyers at 660 minimum, and 680 is a better place to be. From there it improves in 20-point increments: 680, 700, 720 and so on each price differently. One more conventional option: you can have less than 20% down and still avoid a monthly mortgage insurance payment by buying the mortgage insurance out up front. If a client has 15% saved and can't quite reach 20%, sometimes the lowest total monthly payment comes from putting 10% down and using part of the remaining 5% to buy the mortgage insurance out. Everyone is different — there's no universal right answer, which is why we ask what you're buying, where, how many units, your score, your income, and your cash. ### Q&A: buying an investment property when you already own Lauren has an FHA loan and asks what it takes to buy a second property as an investment, and whether there's a low down payment option. Investment property purchase loans require a minimum of 20% down, and most products out there are 25% down. We have some at 20%, but the interest rate is significantly higher than at 25%. So here's what I actually suggest, and it's the opposite of what most people do. Don't buy a home, settle in, and then start acquiring investment properties. If you're a first-time buyer, buy something that works for you *today* — not the house you'll need as a family in five years. If you live in a one- or two-bedroom apartment, buy a one- or two-bedroom condominium. Then when you're ready to move up, do another owner-occupied purchase, hold the first one and rent it out. Condo, then a two- or three-bedroom townhome, then a two-bedroom single family, then a three-bedroom single family. Every rung is a primary-residence purchase with a primary-residence rate and a 3–5% down payment, instead of the big down payment an investment loan demands. Don't take that out of context. When you do a primary-residence purchase you're stating your intent to occupy. I'm not saying buy one, stay a month, and go buy another. Move in, live in it, and buy the next one when you're genuinely ready — maybe a year later. ### Q&A: first-time buyer status, and self-employment income Someone asks whether not buying for five or more years makes you a first-time buyer again. It's three years — if you have not been on the title of a home for at least three years, you're considered a first-time buyer. The same person asks how long you must be in business before self-employment income counts. For the full-documentation programs we're discussing — FHA, conventional, USDA, VA — you provide two years of tax returns, so until you've filed two years of self-employed taxes, that income can't be used to qualify. There are alternative-documentation programs, like a bank statement loan where we calculate income from the deposits going into the account. Some are advertised at 10% down and I have access to them, but the rates are so ugly I'd never put you in one. Realistically you want 20% down for an alternative-doc loan to make sense. ### Q&A: student loans and waiting Ally works for a public institution that will eventually forgive her student loans, and asks whether it's wise to buy before that debt is resolved. If you can afford, with those payments in place, to buy something that genuinely works for you — do it. I'm not telling you to buy a shoebox; I'm telling you that if what you qualify for now is sufficient, get it. When the loans are forgiven and your monthly cash flow grows, that same money goes into savings for the next place. If those payments mean you can't qualify for what your family actually needs, then yes, wait until they're paid off so you can qualify for more. And I'll say this plainly: property values are not dropping. Everyone expected a recession — I thought rates that high would make it impossible to hold values up. What actually happened is that everyone who bought or refinanced in 2020 and 2021 has a rate so low there's no reason to sell. The normal turnover — retirees downsizing, couples trading the condo for a house before a baby — simply stopped, because the payment on a smaller house would be higher at today's rates. Very few listings meant no depreciation; we've actually seen appreciation in a market that would normally have softened. Rates have already dropped nicely since December, and dropped again yesterday and today. As they fall further, all those people who put plans on hold get ready at once — more inventory, but a lot more buyers and a lot more competition. Better to buy what you can now, reap the appreciation, refinance into a better payment when rates come down, and go buy another. ### VA loans VA is by far my favorite loan program, and we do a lot of it. Before the bullet points, one thing: work with someone who has done VA before. If you're a veteran, make sure your lender understands VA loans, and make sure your real estate agent does too. There are elements that have to be written into the contract differently, and if you have an agent you love who's never done a VA deal, have them call us and we'll walk them through it. Sellers: if a VA buyer makes an offer, look at it seriously. Agents get spooked by zero down and assume the appraisal will be harder. In reality the guidelines across almost every program have converged, and the VA appraiser's health-and-safety standards are not meaningfully different from FHA or conventional. Zero down payment. A much higher debt-to-income ratio is allowed, which makes approval easier. No mortgage insurance at all, which makes it more affordable monthly. Rates are much lower than conventional or jumbo. There are no VA loan limits — I've done $2 million VA loans with zero down. Refinancing to a better rate needs no appraisal and no W-2s or tax returns; we verify employment, and it's fast and inexpensive. Closing costs are reduced — we cut lender fees for veterans, because you served. And VA loans are assumable, which we're seeing a lot of right now: a veteran selling a house they bought at a rate in the threes or fours can offer that financing to their buyer. Cash-out refinancing is allowed to 100% of value under VA's own guideline, but the lenders offering VA financing mostly cap it at 90% because they're not comfortable with the risk. We may be able to find a lender who'll go to 100%; plan on about 90%. ### USDA I forgot to upload the USDA slide, so here it is live. USDA is a rural loan. To find out whether a property or an area qualifies, check the USDA website or call us and we'll look it up — and there are far more eligible areas than people expect, so just ask. Zero down payment. The household income limits are quite generous, and the limit depends on how many people live in the home. Beyond household size, income, location, and your credit score, there's nothing else gating it: you didn't have to serve anywhere, and you don't have to be a first-time buyer. But you cannot own other real property. If you own a home, you're not USDA eligible. USDA also has one benefit no other program has: if the appraised value comes in higher than the negotiated sales price, the difference can be used toward your closing costs. Negotiate $400,000, appraise at $402,000, and that $2,000 can help cover closing costs. It's the only loan program that allows it. ### Closing costs Normally in a workshop I put a closing cost estimate on the screen and go line by line. I'm not doing it here, because this is streaming to people in every state, and costs genuinely change by state, county and city — escrow state, title state, attorney state, transfer taxes in some places and not others. I don't want to give anyone inaccurate information. What I will do, free, is take you through an estimate one-on-one. Book a consultation on the website; we'll call you, then schedule a second call where we prepare the estimate, email it to you, and go through it line by line while you have it on your screen. Nothing we do costs you money. We don't get paid unless you close a loan with us. Here's the part I need you to hear. You do not just need your down payment. I get clients sent to me after escrow is already open who were pre-approved elsewhere and thought their 3%, 3.5%, or 5% was all they needed — or who assumed down payment assistance covered everything. On average, expect an additional 2% of the sales price in closing costs. On a $500,000 purchase, that's $10,000. If you don't have that extra 2%, you can negotiate for the seller to pay your closing costs as part of your offer. They don't have to pay all of it — you might land at half a percent, or 1%, or 2%, and sometimes you can get a credit of 3 or 4%. Your lender can also give you a credit. What you cannot do is finance them. The only exception is that USDA appraisal overage I just mentioned. Closing costs are real, they have to be paid, and there is no way around them — but there are several ways to get them covered. ### Q&A: business use, and gift funds A viewer asks whether you can buy a home for business use and also live in it. Yes, if the property is categorized as mixed use — typically the business below and living quarters above. In that case you can get residential financing. If you're buying an ordinary single family home and running your business from a bedroom or a computer, that's just your primary residence, no issue. If you want something genuinely commercial, like a warehouse, that's commercial financing and I don't do it — we're residential only, up to four units. Five units or more is commercial even if you plan to live in one of them, with an entirely different set of guidelines, credit scores and down payments. You can only be good at so many things; I specialize in residential. Laura asks whether closing costs can be paid by a family member as a gift. Yes. On a primary residence or a second home, a gift can help with down payment and closing costs. Not on an investment property. ### Getting pre-approved: what we need from you What we need depends on how you're paid. And to be clear about a common confusion: if you own the company and pay yourself a W-2, you are still self-employed, not a wage earner. If you're a wage earner: one month of pay stubs, two years of W-2s, and the final pay stub you received in each of the last two years. Not the January stub covering December — the last one you actually cashed in that year, because it shows me overtime, commissions, bonuses, vacation and sick pay. Right now that means the final 2022 stub and the final 2023 stub. If you're self-employed and we're doing a full-documentation loan: the last two years of self-employed tax returns. If you're an S corp, a C corp, or an LLC and own more than 25%, we also need the business returns; if you own less as a partner, we take your K-1s on top of your personal returns. And we need a profit and loss — all of 2023, plus year-to-date through today. It's March, so many of you haven't filed yet, and that's fine. Everyone, wage earner or self-employed, provides a copy of their driver's license and their two most recent months of bank statements for the accounts funding the down payment and closing costs. If you're using retirement funds for the down payment or for reserves, we need the most recent quarterly statement — most retirement accounts print quarterly, not monthly — plus the terms and conditions of withdrawal, because having a retirement account doesn't always mean you can access the money. Michelle asks whether it's true you have to prove where your savings came from and that they've been there two months. Yes. We have to source every deposit that's 50% or more of your monthly income. If you make $10,000 a month and there's a $5,000 deposit on the statement, you'll be asked where it came from — a bill of sale and a copy of the check for the car you sold, that sort of thing. And if you have cash at home and want to use it for a down payment, you cannot just walk it into the bank once we're looking. If we see the deposits and you can't source them, that money can't be used. Plan ahead and get it deposited before the statements matter. ### Choosing your real estate agent You're pre-approved, you know your maximum budget, you know what you need for down payment and closing costs, and whether you'll need to negotiate a credit. Now comes the most important piece of your success: your agent. Have your own representation. Buyers often believe they'll get a better deal working with the listing agent, and it has worked out plenty of times — I won't say it can't. But an agent's first responsibility is to whoever they signed a contract with first. If that's the seller, you're the second piece. You don't want to be the side piece; you want to be the most important piece. If you walk into an open house without your agent, that's fine — just make sure the listing agent knows you're working with someone. Same at a new construction site: when you sign in to tour the models, write down your agent's name and number. A lot of buyers don't realize they can bring an agent to a builder at all. Look for an agent with a vested interest in you. What matters isn't the maximum you were pre-approved for — it's that they're talking to you about a monthly payment that's comfortable and showing you homes inside that comfort level. Do you need a particular school district? Do you want to avoid an HOA, or Mello-Roos? How many bedrooms and bathrooms actually matter? Do you need a seller credit written into the offer? They should be an expert in your market: aware of HOA dues, of a condo complex in litigation, of a complex that isn't FHA-approved when you're an FHA buyer, of a building with insurance problems. The worst outcome is spending a Saturday touring, falling in love with a property, and then finding out from me that it's outside your budget, or has Mello-Roos we never discussed, or sits in a complex we can't finance. If you'd like a referral, we work with agents across many states and are glad to hand you off to someone we trust — we get nothing in return for it. When your lender and your agent work as a team, everything goes better. ### Q&A: what is Mello-Roos? Mello-Roos is a way of financing the improvements an area needs — schools, streets, street lights — and you see it most often on new construction in a previously undeveloped area. It's an additional tax added into your property taxes. In California, property taxes generally run about 1.25% of the sales price, and I've seen new-construction areas where Mello-Roos took that to roughly 2.25%. That's a big difference in the monthly payment, and because you qualify on the total payment against your income, it's a big difference in how much home you qualify for. If you don't want to pay it, tell your agent to only show you properties without it. ### Writing the offer You got pre-approved, you found your agent, you toured homes, you fell in love. Now the offer. **Earnest money deposit.** This tells the seller you mean it, and the money is refundable to you if things don't go the way they should — that's what the contingencies protect. The amount is negotiable. Agents often write 3% as a standard number, but say you're a veteran getting in with zero down and a seller credit for closing costs, with no money out of pocket at all — you might negotiate $1,000\. The seller doesn't have to accept it, but it's a negotiation. Other buyers prefer a flat $5,000 or $10,000, or don't mind 3% because they're putting 10 or 20% down and want the seller comfortable. In a multiple-offer situation, a bigger deposit signals you're serious. **Appraisal contingency.** Typically 17 to 21 days in most contracts, which gives you time to order the appraisal, get the appraiser out, and get the report back. If it comes in low you can back out with your deposit or renegotiate. To compete, some buyers waive it entirely — meaning they'll pay the difference in cash, because the bank won't lend more than the home is worth. I'd rather you shorten it than waive it. If your area's average is 17 to 21 days, ask me for the fastest we can do; seven days is very doable, and we've done three and five. You may pay a rush fee to the appraiser, and it's a real competitive edge. **Loan contingency.** Also usually 17 to 21 days. It protects you: if you're not approved and can't close, you get your deposit back. Waiving it means the seller keeps your money if the loan falls through. A buyer with a low debt ratio, a complete pre-approval, and verified down payment funds sometimes waives it — but you don't have to. Tell the seller you'll remove it in seven days instead. Their home is only off the market seven days if something goes wrong, which is nearly as attractive and far safer for you. **Physical inspection contingency.** Same 17-to-21-day norm, often shortened to 7 to 10 days. Before you commit to a number, start calling inspectors to see who can actually get on your calendar and turn a report around. **Termite.** Sometimes you require the seller to provide the report; sometimes you ask for time to order it yourself and pay for it. Another negotiating piece to discuss with your agent before writing. **The closing date.** Also negotiable. The fastest a loan can legally close is seven business days from the date the file is disclosed. I've done it twice in my career, and it required every single party — buyer, seller, escrow, title — to be on their A game and turn documents around in seconds. Ten days is unrealistic. Fourteen days start to finish is genuinely doable and we've done a lot of them: appraisal back in seven, loan approved in seven, closing table at fourteen. ### In escrow Offer accepted. Typically within one to three days you're wiring your earnest money to the closing company — escrow, title, or attorney depending on your state. Use a wire. No cash; you cannot drop cash at the closing agent. A cashier's check can be used but it's harder to source and often gets held. Your closing agent will send wire instructions, and you either set it up through online banking or walk into a branch. At the same time you're calling your lender to say you're ready. We get disclosures out, order the appraisal, and collect the last pieces — updated bank statements and pay stubs if the pre-approval was a few weeks or months ago — same day if you can move that fast, so the file goes to an underwriter and your loan contingency gets handled. You're ordering the physical inspection with your agent, and the termite report if that's on you. About those initial disclosures: they go out first, and I can't order your appraisal or submit your file to underwriting until they're signed. They are *initial* — they don't lock you into anything. They're for you to review and tell me what's wrong: a Social Security number transposed, a previous address entered incorrectly, a misspelling, the wrong employer, a job you changed and forgot to mention. The numbers are my best estimate: the interest rate we anticipate, what I expect you'll owe at closing, and an estimated monthly payment using an average homeowners insurance figure, since you haven't shopped a policy yet. Signing them states your intent to proceed. This is also when we talk about locking your interest rate. I did a whole show on locking a couple of weeks back — it's in the live playlist here on YouTube, so go watch that one rather than have me spend the time tonight. Escrow is where it gets busy and where the stress starts, which is exactly why I ask for so much up front. When your file goes to underwriting it comes back with conditions, and I don't want you handling a list of 30 items while you're also meeting a physical inspector and negotiating repairs. I'd rather do the due diligence early, get an approval back with four easy conditions, clear them, and tell your agent you can remove the loan contingency. It will feel like a lot for a pre-approval. That's the point. ### Closing your loan The appraisal came in, the loan is approved, the inspection was clean or the seller handled repairs. Now you get your closing disclosure — the CD. Those first disclosures were estimates; this one is the final terms: sales price, down payment, interest rate, total monthly payment, the real homeowners insurance from the binding policy I ordered off your quote, the real property taxes from the title company, and every title, escrow, or attorney fee. This is what allows us to get you to the table. Review it. If anything is different from what you expected — especially if you're being asked to bring in $3,000 more than you were shown — do not sign it. Call your loan officer. With a good loan officer this shouldn't happen; if something changed during the loan, they should have told you as it happened. You and your loan officer should be thick as thieves through a transaction, and your CD should never be a surprise. Once you sign it, we cannot issue your loan documents for three business days. So if your closing date is March 31st and your CD hasn't reached your inbox by roughly the 24th or 25th, you are not closing on time — pick up the phone and find out what's going on. I try to send closing disclosures about ten days before the closing date, so there's time to review, ask questions, sign, get closing documents to the closing agent, schedule your signing, and get your final funds wired in. This is why seven business days is a floor: I disclose, you sign, then the CD, then three more business days. Don't sign it just to move things along — catch a number you disagree with before loan documents go out, not at the signing table. ### Q&A: home inspector referrals Someone asks whether I can refer home inspectors in California. Honestly, no. I order your appraisal; your real estate agent is responsible for making sure the home inspection happens inside the contingency window, and they're the one meeting you and the inspector at the property. Your agent is the right person to ask. You can also search for one yourself, and a licensed contractor in the family could likely do a solid job. Since I'm not out there meeting inspectors, I don't keep a running list. ### Wrap-up That's the workshop, start to finish. My goal in marketing isn't to throw out interest rates and claim to be the lowest so your phone rings. It's to educate you, work with you, and hope you feel comfortable enough with me and my team to want to work with us. We don't make money without you. Book a one-on-one consultation on the website, mortgagemomradio.com — there's an appointment button — or call the office at 844-935-3634, that's 844-WE-LEND-4\. You can email or text us too; whatever's easiest. The podcast, YouTube, Facebook, Instagram and TikTok are all there as well. And to know when the weekly show goes live, text the word LIVE to that same number. I'll be live again next Wednesday right here on YouTube. Talk to you all real soon. Debbie Marcoux is licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, NMLS ID #237926, and additionally licensed in AZ (0941504), FL, GA, HI, ID, IL, NV, NC, OR, TN, TX, and WA. Rates and figures discussed were current as of the air date of March 6, 2024, reflect national conforming averages, and are not an offer of credit or a rate quote. Debbie Marcoux is not a financial advisor; consult qualified professionals about your individual situation.