Step 1Know where you stand
Run through the readiness checklist before anything else.
Free borrower education
Know your file.
Own your future.
Thirteen free tools, a plain-language glossary, and a guided path through the mortgage maze — built so no borrower ever signs what they don’t understand.
FREE FOREVERNO ACCOUNTNO EMAIL
Start here
Ten steps, in the order that matters.
A borrower who follows this path walks into a lender’s office harder to take advantage of. Each step hands you the exact tool for the job — or jump straight to any tool below.
Step 3See what your payment buys
Work backward from a monthly payment to a realistic price range.
Step 5Debts and DTI
See which debts move your debt-to-income ratio — plus two special cases, if they apply to you.
Step 6Gift money, done right
Get the exact documentation checklist for gift funds by loan type.
Step 8Check your own file
Spot the document problems that slow files down — self-employed? map your K-1 too.
Step 10Read your forms
Understand the Loan Estimate and Closing Disclosure — then compare yours line by line.
Steps with extra links are “sit-out-able”: community-property rules matter in nine states, co-signer math matters if someone is co-signing, and the K-1 map matters if you are self-employed. Skip what does not apply to you.
The toolkit
Thirteen instruments. Zero dollars.
Eleven interactive tools, a plain-language glossary, and a Loan Estimate / Closing Disclosure explainer. Change the numbers, watch what moves, and read the assumptions under each result — what’s included and what’s not. That’s the whole point: no black boxes.
13 tools · 2 guides · 1 path
Mortgage Readiness Checklist
Buying a home starts long before the application. These are five things that strengthen a mortgage application — check off each one you feel good about, and read the tip underneath.
0 of 5 complete
How this checklist works: it’s a plain list, not a scoring model. Nothing is weighted and there is no hidden formula. Checking every box does not mean you are approved — it means you’ve organized the same documents and habits lenders ask about. Only a lender reviewing your full file can speak to approval.
Rent vs Buy
Compare the cost of renting with the cost of buying the same home over the time you actually plan to stay. Every number below follows your chosen time frame — change “Years to Stay” and watch them all move.
Ownership payments · 5yr
$168,880
Rent cost · 5yr
$108,000
Principal paid down · 5yr
$23,272
Appreciation · 5yr
$63,710
Home equity · 5yr
$106,982
Monthly ownership payment
$2,815
Wealth difference (buy vs rent)
+$26,102
Break-even month
Month 1
Assumptions behind these numbers: 30-year fixed mortgage at the rate you entered; home value grows 3% per year, every year; rent, taxes, and insurance stay flat. Not modeled: mortgage insurance (MI), maintenance and repairs, selling costs, purchase closing costs, rent increases, property-tax or insurance increases, the investment value of your down payment if you kept renting, or tax effects. Real life is messier — treat this as a starting illustration, not a prediction.
What Can My Payment Buy?
Start with a monthly payment you’re comfortable with and see the rough home-price range it supports. This is an illustration, not a pre-approval — read what’s not included right under the number.
Estimated price range
$331,000 – $366,000
Rough illustration from your payment — see exclusions directly below.
Not included in this estimate: mortgage insurance (MI), closing costs, prepaid taxes and insurance, loan limits for your area and loan program, and pricing adjustments for credit score or property type. A lender’s pre-approval checks all of these.
Max loan this payment supports
$331,484
For principal & interest
$2,150
Est. down payment cash
$17,447
Taxes + insurance + HOA
$350
Shopping tip: when you tour homes, stay comfortably under the top of this range — real monthly costs (MI, utilities, upkeep) are always bigger than the worksheet.
Payment Shock Simulator
Compare what you pay for housing now with the full monthly cost of the home you’re considering. Lenders look closely at big jumps — this shows you the size of yours in plain numbers.
Proposed housing payment
$2,450
Current rent
$1,800
Monthly difference
+$650
Change vs rent
+36.1%
Why this matters: a large increase from your current housing payment — sometimes called “payment shock” — gets extra attention during underwriting. If your new payment is much higher than your rent, be ready to show you can comfortably afford it: steady income, savings left over after closing, and on-time payment history all help tell that story.
Educational illustration only. This compares two monthly numbers you entered — it is not a loan decision and not financial advice. Actual mortgage payments can also include mortgage insurance where applicable, and your lender’s figures may differ. Verify everything with a licensed mortgage professional.
Community Property Debt Overlay
In community-property states, a non-borrowing spouse’s debts are generally counted in your debt-to-income ratio — even if your spouse isn’t on the loan. See the difference side by side.
DTI — your debts only
10.7%
DTI — with spouse’s debts
16.7%
Including your spouse’s debts adds 6.0 percentage points to the DTI in this illustration (Arizona).
How this works: DTI is monthly minimum debt payments divided by gross monthly income. In the nine community-property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI), a non-borrowing spouse’s debts are generally included in that math on many loan programs — but the exact rules vary by loan program and lender, and some debts may be treated differently. (Alaska lets married couples opt into community-property treatment.) This is an illustration, not a loan decision — talk to your loan officer about your situation.
Gift Fund Documentation Wizard
Gift money for a down payment has rules — and a paper trail. Answer two questions to see the documentation lenders expect for your situation.
What type of loan are you considering?
Condo HOA Deal-Breaker Screener
When you buy a condo, your lender reviews the whole project — not just your unit. Answer what you know; each flag below is something to discuss with your loan officer, not a verdict on the project.
Where the numbers come from: the 35% commercial-space ceiling, the single-entity ownership limits, and the litigation and critical-repair standards are drawn from Fannie Mae’s published condo project standards (Selling Guide B4-2.1-03), verified September 2026. Guidelines change, lenders add overlays, and FHA, VA, and other programs have their own project rules. This screens a few standards — it does not review a project. Verify with your lender.
Mortgage Document Red Flag Checklist
These are the issues that most often stall a file — and you can spot every one of them yourself before your lender does. Check each item you’ve reviewed in your own documents.
0 of 7 reviewed
Educational checklist only. Finding — or not finding — these items says nothing about whether a loan will be issued. Lenders review far more than this list, and only a lender reviewing your complete file can speak to its status. When in doubt, ask your loan officer.
DTI Payoff Planner
Debt-to-income ratio is monthly minimum payments divided by gross monthly income. Enter your debts, then mark any as “paid off” to see the resulting DTI — and see which payoffs free the most monthly payment per dollar.
Current DTI
9.1%
Counted monthly payments
$686
| Debt | Monthly payment | Monthly $ freed per $1,000 of payoff |
|---|---|---|
| Credit card | $156 | $30 |
| Car loan | $320 | $27 |
| Student loan | $210 | $11 |
How to read this: paying a debt off completely removes its whole monthly payment from your DTI. The table ranks your remaining debts by how much monthly payment each $1,000 of payoff removes — the top row frees the most DTI per dollar spent. Separately, the debt with the largest monthly payment lowers your DTI by the largest amount when paid off in full. Both views are just math — neither is a recommendation.
What this doesn’t model: interest costs, credit-score effects, the trade-off of spending savings versus keeping cash reserves, or how a lender treats recently closed accounts. Paying down (but not off) a debt usually doesn’t change its minimum payment — or your DTI. This is an illustration, not financial advice; talk to your loan officer before moving money around.
Co-Signer DTI
When someone co-signs your mortgage, the lender generally looks at both people’s income and both people’s debts together. Enter each side to see the individual and combined ratios.
Borrower DTI
10.8%
Co-signer DTI
7.3%
Combined DTI
9.2%
What “combined” means: the lender adds both incomes together and both sets of monthly debts together, then divides — the same DTI formula, with two people’s numbers. A co-signer with high debts of their own can raise the combined ratio even while adding income.
Rules vary by loan program — for example, how a non-occupant co-borrower’s income and debts are treated differs across programs, and lenders add their own overlays. Co-signing is also a serious commitment for the co-signer: they’re equally responsible for the debt. This is an illustration, not loan advice — both parties should talk to the loan officer (and their own advisors) before deciding.
K-1 / S-Corp Document Map
Self-employed with an S corporation? Your tax paperwork confuses almost everyone. This guide shows where the mortgage-relevant figures live — it doesn’t calculate income.
Form 1120-S — the company’s tax return
An S corporation files its own return, Form 1120-S. Think of it in three layers: the main form reports the company’s overall ordinary business income (loss) for the year; a summary called Schedule K totals each type of income, deduction, and credit for all owners combined; then each owner gets their personal slice on a Schedule K-1.
When a lender asks for your business returns, this full package — 1120-S plus all K-1s — is what they mean.
Schedule K-1, Line 1 — Ordinary business income (loss)
Your K-1 is your personal slice of the company. Line 1 shows your share of the ordinary business income (or loss) — the profit or loss from the company’s normal day-to-day operations.
This is the headline number: it reflects your share of what the business earned, whether or not that cash ever reached your pocket.
Schedule K-1, Line 16 (Code D) — Distributions
Money the company actually paid out to you during the year — cash or property — is reported on Line 16 with code “D” for distributions.
Distributions are not the same as income. You can owe tax on business income you never received as cash, and receiving a distribution doesn’t create new income. Lenders look at both lines because the gap between them tells a story about cash flow.
Your salary isn’t on the K-1
If you’re an owner who also works in the business, your paycheck is reported on a W-2 like any employee’s — it doesn’t appear on the K-1. Lenders generally review the W-2 and the K-1 together to see the full picture of what the business provides you.
What lenders generally ask for
Expect to provide one to two years of business and personal tax returns, including the full 1120-S with all K-1s. How business income, losses, and distributions factor into your file depends on the loan program and the lender’s review.
Ask your loan officer exactly what your program needs — requirements vary.
Verify against the current IRS forms: line numbers refer to the current Form 1120-S and Schedule K-1 — confirm against the actual form for your tax year, since forms are revised. This guide explains where figures live; it does not calculate income and is not tax or loan advice.
Plain-Language Mortgage Glossary
The words lenders use, translated into plain English. Search for any term — or browse the full list. If a word on your Loan Estimate or Closing Disclosure confuses you, start here.
Showing 55 of 55 terms
PITI
The four parts of a typical monthly mortgage payment: Principal, Interest, property Taxes, and homeowner's Insurance. When a lender quotes your “monthly payment,” this is usually what they mean — before HOA dues or mortgage insurance.
DTI (debt-to-income ratio)
Your monthly minimum debt payments divided by your gross monthly income, shown as a percentage. It shows how much of your income is already committed before a mortgage payment is added.
LTV (loan-to-value ratio)
The loan amount divided by the home's appraised value or purchase price, whichever is lower. A $180,000 loan on a $200,000 home is 90% LTV — which also means a 10% down payment.
APR (annual percentage rate)
Spreads the interest rate plus most lender fees and mortgage insurance across the loan term, so you can compare the true cost of loan offers that have different fee structures.
Escrow
A separate account your servicer uses to pay property taxes and homeowner's insurance on your behalf. Part of each monthly payment goes into escrow so those large bills are covered when they come due.
PMI (private mortgage insurance)
Insurance that protects the lender — not you — on conventional loans with less than 20% down. Usually paid monthly, and it can sometimes be removed once you build enough equity; the rules depend on the loan.
MIP (mortgage insurance premium)
The FHA version of mortgage insurance. It has two parts: an upfront premium (often rolled into the loan amount) and a monthly premium that in most cases lasts for the life of the loan.
Discount points
Optional upfront fees paid at closing to lower your interest rate. One point equals 1% of the loan amount. Whether points pay off depends on how long you keep the loan.
Closing costs
All fees due at closing: lender charges, title and escrow fees, recording fees, prepaid taxes and insurance, and more. A common planning figure is 2–5% of the purchase price, but your Loan Estimate shows your actual numbers.
Earnest money deposit
Money you put down with your offer to show the seller you are serious. It is held in escrow and applied to your purchase at closing — or returned or forfeited according to the contract if the deal falls through.
Appraisal
An independent professional opinion of the home's value. Your lender orders it to confirm the property is worth enough to support the loan amount.
Underwriting
The lender's detailed review of your income, assets, debts, credit, and the property before a final loan decision. An underwriter verifies that the file meets the program's guidelines.
AUS (automated underwriting system)
Software that runs a borrower's file against an investor's guidelines and returns findings. It organizes the review and flags what needs documentation — it does not replace the human underwriter.
Pre-qualification
A rough, unverified estimate of what you might borrow, based on numbers you state yourself. Useful for early planning, but it carries little weight with sellers.
Pre-approval
A lender's written, conditional statement of how much you could borrow, based on a review of your credit and finances. Stronger than a pre-qualification, but still not a final loan commitment — the file goes through underwriting later.
Rate lock
An agreement that holds your quoted interest rate for a set number of days while the loan is processed. If the lock expires before closing, you may need to accept the current rate or pay to extend it.
Title insurance
Insurance against ownership claims on the property — old liens, recording errors, or disputes about who owned it. The lender's policy is required; an owner's policy is optional but commonly recommended.
Amortization
The schedule by which a loan is paid down over time. Early payments go mostly to interest; later payments go mostly to principal. An amortization table shows the split for every month of the loan.
Forbearance
A temporary agreement with your servicer to pause or reduce payments during a hardship. It is not forgiveness — the missed amounts are repaid later under the plan's terms.
Loan Estimate
The standardized 3-page form your lender must send within 3 business days of your application. It shows your estimated rate, monthly payment, and closing costs in a format you can compare across lenders.
Closing Disclosure
The standardized 5-page form with your final loan terms and costs. You must receive it at least 3 business days before closing, giving you time to compare it against your Loan Estimate.
Down payment
The cash you pay toward the purchase price that is not borrowed. A larger down payment means a smaller loan — and can reduce or remove mortgage insurance.
Principal
The amount you borrowed, not counting interest. Each monthly payment reduces the principal a little, after interest is paid first.
Interest
The cost of borrowing, expressed as a rate. It is calculated on the remaining principal, which is why early loan payments are mostly interest.
Mortgage insurance
Insurance that protects the lender if the loan defaults. It applies to low-down-payment loans and is paid monthly, upfront, or both, depending on the program.
HOA dues
Monthly or quarterly fees paid to a homeowners association for shared upkeep — landscaping, amenities, building insurance. Lenders count them as part of your housing payment.
Property tax
Annual taxes charged by your county or city, based on the assessed value of the home. They are usually collected a little each month through escrow.
Homeowner's insurance
Insurance covering damage to the home and liability. Your lender requires it, and the premium is usually collected monthly through escrow.
Flood insurance
Separate coverage required if the home sits in a designated flood zone. A standard homeowner's policy does not cover flood damage.
Loan term
How long you have to repay the loan — commonly 30 or 15 years for fixed-rate mortgages. Shorter terms mean higher payments but far less interest paid over time.
Fixed-rate mortgage
A loan whose interest rate never changes. The principal-and-interest portion of your payment stays the same for the life of the loan.
Adjustable-rate mortgage (ARM)
A loan whose rate is fixed for an introductory period, then adjusts with the market. Payments can rise or fall after the fixed period ends; caps limit how far they can move at each adjustment.
FHA loan
A mortgage insured by the Federal Housing Administration. Common with first-time buyers because down payments can be lower than many conventional loans require; it carries both upfront and monthly mortgage insurance.
VA loan
A mortgage backed by the U.S. Department of Veterans Affairs for veterans, active-duty service members, and some surviving spouses. Typically no down payment and no monthly mortgage insurance.
Conventional loan
A mortgage not insured or backed by the government, usually sold to Fannie Mae or Freddie Mac. Down payments can start low, but less than 20% down generally means private mortgage insurance.
USDA loan
A mortgage backed by the U.S. Department of Agriculture for homes in designated rural areas. Typically no down payment; the property must be inside the program's rural footprint.
Jumbo loan
A loan larger than the conforming limit set each year for Fannie Mae and Freddie Mac. Because it cannot be sold to them, its requirements and pricing differ from conforming loans.
Non-QM loan
A mortgage that does not meet the federal “Qualified Mortgage” standards — for example, bank-statement loans for self-employed borrowers. Terms and requirements vary widely by lender.
Gift funds
Money given — not loaned — for a down payment or closing costs, usually by family. Lenders require a gift letter and a paper trail proving the money was transferred and is not a loan.
Reserves
Savings left over after closing, measured in months of mortgage payments. Some loan programs look for reserves as a cushion against future hardship.
Asset
Anything of value you own: bank accounts, investments, retirement funds, property. Lenders verify assets to confirm your down payment and reserves.
Liability
A debt or obligation you owe: car loans, credit cards, student loans. Lenders compare your minimum monthly liability payments to your income.
Credit score
A number summarizing your credit history. Lenders consider it alongside your income, debts, and the rest of your file when reviewing an application.
Credit report
A record of your borrowing and payment history from the credit bureaus. Review yours before applying so there is time to dispute errors.
Hard inquiry
A credit check tied to an application, such as a mortgage application, that can slightly affect your score. Rate-shopping inquiries made within a short window are generally treated as a single inquiry.
Cash to close
The total money you must bring to the closing table: down payment plus closing costs, minus your earnest deposit and any credits.
Origination fee
A charge from the lender for processing the loan, often shown as a percentage of the loan amount. It appears on your Loan Estimate.
Lender credits
Money the lender applies toward your closing costs, usually in exchange for a slightly higher interest rate. They reduce cash to close but raise the long-term cost of the loan.
Rate buydown
Paying upfront — as discount points or a temporary buydown — to get a lower interest rate. Compare the upfront cost against how long you expect to keep the loan.
Transfer taxes
State or local taxes charged when property changes hands. The amount depends on your location; this category on your Loan Estimate generally cannot increase at closing.
Recording fees
Government charges to record the deed and mortgage in public records. A fixed, non-negotiable part of closing costs.
Loan product
The specific mortgage type and terms — for example, “30-year fixed conventional.” The product name on your Closing Disclosure should match what you agreed to.
Servicer
The company you actually send your monthly payment to. Your loan is often transferred to a servicer after closing; the loan terms do not change when that happens.
Default
Failing to meet the loan's terms, usually by missing payments. Extended default can lead to foreclosure — which is why servicers offer hardship options before it reaches that point.
Equity
The part of the home you truly own: its value minus what you owe. Your down payment is your starting equity, and each principal payment adds more.
Educational reference only. Definitions are simplified for clarity and are not legal or loan advice. Exact meanings can vary by loan program and state — when a term appears in your own documents, ask your loan officer what it means in your case.
Your Two Most Important Forms, Explained
Two standardized forms carry almost every number that matters in your mortgage: the Loan Estimate (what you were offered) and the Closing Disclosure (what you are actually signing). Learn what each one is, then use the checklist to compare them line by line.
What it is
Within 3 business days of receiving your application, your lender must send you a Loan Estimate — a standardized 3-page form. Because every lender uses the same format, you can lay estimates side by side and compare them apples to apples.
Page 1 — Loan Terms
The headline numbers: loan amount, interest rate, and monthly principal & interest. It also answers three yes-or-no questions you should read carefully — can the interest rate rise, can the monthly payment rise, and is there a prepayment penalty or balloon payment?
Page 2 — Projected Payments & Costs at Closing
The itemized breakdown: what you will pay each month (including mortgage insurance and estimated escrow), and every fee grouped by category at closing.
Page 3 — Comparisons & other considerations
Useful context, including what you will have paid after five years and how the offer compares in plain numbers.
Which numbers are allowed to change? In plain words: the lender's own fees and transfer taxes generally cannot increase. Fees for services your lender chose (like the appraisal) can move, but only up to 10% in total. Prepaid interest, insurance, escrow amounts, and services you shopped for yourself can change freely. If a number moved more than its category allows, ask about it.
Educational summary only. Timing rules and tolerance categories are summarized from federal disclosure requirements (TRID) as generally applied; individual circumstances, loan types, and state rules can differ. This is not legal or loan advice — verify the details of your own forms with your lender.
Keep learning
Trusted resources, straight from the source.
These free programs come from the government agencies and organizations that write the rules — education courses, counseling, and assistance lookups worth bookmarking as you work through your homebuying plan.
Fannie Mae HomeView
Fannie Mae’s free homebuyer education course. The certificate satisfies the homeownership education requirement for many loan programs.
Freddie Mac CreditSmart Homebuyer U
Freddie Mac’s free course for homebuyers. Its certificate meets the education requirement for Freddie Mac Home Possible and HomeOne mortgages.
HUD-Approved Housing Counseling
Find a HUD-approved housing counselor near you by ZIP, or call HUD at (800) 569-4287. Counseling is often free or low-cost.
CFPB: Owning a Home
The Consumer Financial Protection Bureau’s plain-language homebuying toolkit: loan options, closing checklists, and a tool to explore interest rates.
Down Payment Resource
A free search tool that matches you with down payment assistance programs that may fit your situation.
Why this is free
Confusion costs borrowers real money.
The mortgage process is confusing by default — and that confusion falls hardest on first-time buyers and buyers in underserved communities, who are the least likely to have a trusted advisor walking them through it. This project exists to close that gap with honest, borrower-first education: no jargon, no sales pitch, no paywall between a homebuyer and the concepts that determine what they’ll pay for the next thirty years.
Financial literacy, not lead generation
These tools teach concepts — readiness, rent-vs-buy math, what a payment actually buys. They don’t harvest contact information or route visitors toward a product.
Built for the buyers who need it most
First-time buyers, buyers without family experience in the process, and anyone who has ever nodded along in a lender’s office without fully understanding. Plain language throughout; assumptions stated, never hidden.
Measured honestly
We count anonymous tool uses — which tool was opened, and when — so grant funders can see the project’s reach. No names, no emails, no tracking. Outcomes we aim for: buyers who ask better questions, spot problems earlier, and avoid preventable surprises.
“A borrower who understands the process is a borrower who can’t be rushed, misled, or overcharged.”
Questions
What borrowers ask us.
Is this really free? What's the catch?
It's free, and there is no catch. No account, no email address, no trial that converts to a bill. This borrower-education project is funded separately from Mortgage File IQ's commercial products, and it is intentionally kept free so that cost is never the reason someone signs a mortgage they don't understand.
Do you collect my information?
No. Everything you type into the tools stays in your browser — nothing you enter is sent, stored, or sold. The only data recorded is an anonymous count when a tool is opened (which tool, and when), used only to show grant funders that the project is reaching people. There is nothing to opt out of because there is nothing personal to collect.
Will these tools tell me if I'm approved for a mortgage?
No — and you should be skeptical of any free tool that claims to. These tools calculate what can be calculated and explain the concepts; they do not determine eligibility or issue approvals. Only a lender reviewing your complete file can speak to approval.
Who is this section for?
Homebuyers who want plain-language explanations before they talk to a lender — especially first-time buyers and buyers in underserved communities who may not have a trusted advisor walking them through the process.
Why does Mortgage File IQ offer this for free?
Because the mortgage process is confusing by default, and confusion costs borrowers real money. A borrower who understands readiness, rent-vs-buy math, and what their payment actually buys walks into the process harder to take advantage of. That outcome is worth funding on its own.
GUIDELINE PROFILE: GENERAL EDUCATIONAL · REVIEWED SEPTEMBER 2026
Educational & pre-underwriting workflow tools. These tools calculate what can be calculated and explain the concepts — they do not determine eligibility, issue underwriting approval, or commit to lend. Results are simplified illustrations. Agency guidance, lender and investor overlays, AUS findings, documentation requirements, and individual loan circumstances may change the final determination. Verify all figures against current agency guidelines and your lender’s compliance department.
Process to Close™ · Powered by MortgageFileIQ