What you can actually afford, the cash it takes, how to compare lenders, and what happens between an accepted offer and closing day — in the order it happens, with the Michigan details most guides skip.
Most purchases take two to four months from the first serious conversation to the keys, and the part people picture — touring houses — is the shortest of it. The steps that decide whether it goes smoothly come first.
Start from the monthly payment you are comfortable with, not the largest loan a lender will approve. The budget check below does the arithmetic.
Pull your reports, fix errors, and collect two years of W-2s or tax returns, recent pay stubs and two months of bank statements. The Credit Score Guide covers the score side.
A loan officer reviews your credit, income and assets and tells you, in writing, what you are approved to borrow and on which program. Sellers expect one with an offer.
You now sign a written agreement with an agent before touring, and it states what they are paid. That pay is negotiable, and a seller may agree to cover some or all of it.
Price, earnest money, contingencies and a closing date. Your agent writes it; you decide what each piece is worth to you.
The inspection, your formal loan application, and comparing Loan Estimates if you have not already chosen a lender.
The lender values the house, verifies everything you told them, and issues conditions. Answer them the same day you get them.
You receive the Closing Disclosure at least three business days before, do a final walk-through, and sign at the title company.
Lenders measure affordability with one number: your debt-to-income ratio, or DTI — every monthly debt payment, including the new house payment, divided by your gross monthly income. The house payment means all of it: principal and interest, property taxes, homeowners insurance, mortgage insurance, and HOA dues if there are any. Car loans, student loans, minimum card payments and child support count. Utilities, phone, groceries and daycare do not — which is exactly why an approval can be larger than a comfortable budget.
Enter three numbers. Nothing you type leaves this page.
| Total DTI | What it usually means |
|---|---|
| Up to 36% | The classic comfort guideline (with housing alone near 28%). Room left for savings, repairs and the things DTI does not count. |
| 36–45% | Within what conventional loans commonly approve. Livable, but the budget is doing real work. |
| 45–50% | Approvable on many programs with strong credit, savings left after closing, or a larger down payment. Tight in practice. |
| Over 50% | Above what most programs approve. FHA’s automated underwriting sometimes goes higher; whether you should is a different question. |
Typical guidelines, which vary by program, lender and the rest of the file, and change over time.
Set aside 1% to 2% of the home’s value a year for maintenance and repairs, more for an older house. Utilities on a house are usually higher than on an apartment, and the first year brings purchases nobody plans for: a mower, window coverings, a water heater that picked its moment.
The down payment is the number everyone asks about, but it is one of four piles of money, and they come due at different times.
| What | Typical size | When it’s due |
|---|---|---|
| Earnest money | ~1% of price, set by local custom | Within a few days of an accepted offer. Held by the title company and credited to you at closing. |
| Inspection, appraisal | A few hundred dollars each | During the contract. Usually paid even if the deal falls through. |
| Down payment | 0% to 20%+, by program | At closing. |
| Closing costs | Commonly 2–5% of the loan | At closing. Lender fees, title insurance, recording, and prepaid taxes, insurance and interest. |
| Reserves | 0 to several months of payments | Not spent — just still in your account after closing. Some programs require them; all of them like them. |
Typical ranges, not estimates for any particular purchase. Your Loan Estimate itemizes the real figures.
Underwriting reads your bank statements line by line. A deposit that isn’t payroll — cash from selling a car, money moved from a relative, a side-job payment — will need an explanation and documents. Move money early, keep it in one account, and don’t deposit cash you can’t trace.
Nearly every first home is bought with one of these. The cheapest one for you depends on your credit, your down payment and the property, so a good loan officer prices more than one before recommending any.
| Program | Minimum down | Best for |
|---|---|---|
| Conventional | 3% for some buyers, 5% typical | Credit in the high 600s and up. Mortgage insurance below 20% down can be removed later as equity builds. |
| FHA | 3.5% with 580+ | Lower scores or higher DTI. Mortgage insurance does not change with credit score, but usually lasts the life of the loan with under 10% down. |
| VA | None | Eligible veterans, service members and some surviving spouses. No monthly mortgage insurance. |
| USDA | None | Homes in eligible rural and suburban areas — more of Michigan than people expect — with household income limits. |
Program minimums that vary by lender and change over time — not an offer of any loan or term. See the Product Atlas for every program’s full requirements, including the less common ones.
Two choices sit on top of the program. Fixed or adjustable: a fixed rate never changes; an adjustable rate is fixed for a set number of years and then moves with the market. Term: a 30-year loan keeps the payment lower, a 15-year loan costs far less interest. You can always pay a 30-year loan faster; you can’t pay a 15-year loan slower. The Effective Rate Calculator shows what extra payments do.
A pre-qualification is an estimate built on what you tell a lender. A pre-approval means someone has pulled your credit and read your pay stubs, tax documents and bank statements. Sellers and their agents know the difference, and in a competitive offer it can matter as much as price. Neither one is a commitment to lend: that comes only after the house is appraised and the full file is underwritten.
Once you apply, every lender must send you a Loan Estimate within three business days — the same three-page federal form from every lender, so they can be laid side by side. An advertised rate leaves out what it costs to get it.
Several mortgage credit pulls inside a short window count as a single inquiry, so shopping does not cost you score points if you keep it to about two weeks.
A lock holds your rate and price for a set period, commonly 30 to 60 days, while the loan closes. Lock once you have a signed purchase contract and are comfortable with the price on offer. Ask what an extension costs if closing slips, and whether the lender offers a one-time float-down if rates fall after you lock.
Hire your own inspector and go to the inspection. It is the cheapest few hundred dollars in the whole purchase. Look past the length of the report to the expensive items: roof, foundation, water in the basement, electrical panel, furnace and water heater age, and the sewer line, which a standard inspection doesn’t cover — a camera scope of the line is worth it on an older house with mature trees. A well and septic system each need their own inspection. Then ask for repairs or a credit on the things that matter, not on the cosmetic list.
The lender orders an appraisal to confirm the house is worth what you’re paying. If it comes in low, the loan is sized to the appraisal, not the price, and the gap has to be closed: the seller lowers the price, you bring more cash, you meet in the middle, or — with an appraisal contingency — you walk away.
The underwriter verifies income, assets, credit and the property, and issues conditions: a missing bank statement page, a letter explaining a deposit, an updated pay stub. Answering them the day they arrive is the single best way to close on time. Then you get clear to close.
You receive the Closing Disclosure at least three business days before you sign. Compare it with your Loan Estimate, line by line, and ask about anything that moved. Bind homeowners insurance before closing — the lender requires proof — and flood insurance if the house sits in a flood zone. Do a final walk-through, then sign at the title company and bring certified funds or a wire for your cash to close.
Criminals send convincing emails with “updated” wiring instructions just before closing. Before you wire a dollar, call the title company at a phone number you found yourself — not one in the email — and confirm the instructions out loud. Legitimate wiring instructions do not change by email at the last minute.
Financing the furniture. A new card, a car loan or a store financing plan between application and closing changes your DTI, and lenders pull credit again before closing. Buy the couch after.
Changing jobs without calling the lender first. A move to a higher salary in the same field is usually fine. A switch to commission, self-employment or a probationary period can stop a closing.
Moving money around. Every transfer between accounts becomes another statement to explain. Leave your down payment where it is.
Shopping above the pre-approval. The approval is a ceiling, not a target, and a higher price usually also means higher taxes and insurance than the approval assumed.
Skipping the inspection to win. In a hot market it can win the house. It can also buy you a roof. If you waive the contingency, consider an inspection for information only before you offer.
Not reading the Closing Disclosure. Three business days exist so you can catch mistakes while there is time to fix them.
The fastest way to turn a budget into a real number is a short conversation about your income, your savings and the kind of home you want — before you fall for one. A conversation is not an application, a credit pull, or a commitment to lend.
See where you stand