How we choose your loan program
The seven steps we follow to compare every realistic way to finance your home, and why small details like a 679 score can matter.
By Daniel Hennek, Owner – Principal Broker, NMLS 198218
Updated
Every file starts with one question: what is the most cost-effective way for you to finance this home? We are not looking for the loan that is easiest to close or the one a single lender happens to promote this month. Here is how we answer that question, step by step.
1. Get the full picture
We start with income, assets, debts, credit, the property and your plans. We ask how long you expect to stay and whether you plan to refinance, pay extra or sell in a few years. A loan that is least expensive over 3 years can be the most expensive over 15. Your timeline changes the answer.
2. Start with assets
Your cash shapes much of the plan, including how much you put down, what remains for closing costs and what remains in reserve. We also ask whether some of that cash would do more good paying off a car loan or credit card than going into the down payment.
Down payment does not work on a smooth scale. Loan pricing and mortgage insurance move in steps, or tiers, based on loan-to-value (the loan amount as a share of the home’s value). Fannie Mae’s pricing grid, for example, changes at 80%, 85%, 90% and 95% loan-to-value. That means 5%, 10%, 15% and 20% down are break points.
The question is how much you can put down, and also what the next tier costs and whether reaching it is worth the cash. Sometimes a little more cash crosses a break point and saves money every month. Sometimes it does not change the price at all, and the cash can stay in reserve.
3. Look closely at credit
Credit works the same way. Pricing changes in 20-point bands. On Fannie Mae’s grid, those bands break at 640, 660, 680, 700, 720, 740, 760 and 780. A 679 and a 680 are one point apart, but they sit in different tiers. That one point can change your rate, your fees or your mortgage insurance.
When you are just under a break point, we look at whether a short-term fix makes sense before you lock. A common example is paying down a card balance before its statement date. We will tell you plainly whether it is worth waiting for. See building a credit plan for how that works.
Credit also affects program choice. A score that prices poorly on a conventional loan may price better on FHA, and the reverse is also true.
4. Compare loan structures with real numbers
If you qualify for a VA loan, we price it first, since it is often the best option for those who qualify. Then we run each other realistic option and compare:
- Monthly payment, including taxes, insurance and mortgage insurance
- Cash to close
- Total cost over the years you expect to keep the loan
- How the picture changes if you refinance or sell early
We also look at points. Paying points lowers the rate, but it only pays off if you keep the loan long enough. The points lesson explains that calculation.
5. Check the property
The property can rule programs in or out. In Southwest Colorado, we see many homes on acreage, with wells and septic systems, as well as manufactured homes and homes that need work. Location matters too. USDA requires an eligible area, and some lenders treat rural or high wildfire-risk areas differently. We check this early so it does not surprise you during underwriting.
6. Pick the right lender
Because we are a Mortgage Broker, we can place your loan with different wholesale lenders. That matters because lenders do not all price or underwrite the same way.
The main difference is overlays. An overlay is a lender’s own rule on top of the agency’s rule. Fannie Mae, FHA or VA might allow something, and a given lender may not. Common examples include:
- A higher minimum credit score than the program requires
- Tighter limits on debt-to-income
- Extra rules for manufactured homes, acreage or non-warrantable condos
- More reserves than the program requires
One lender’s overlay can turn a yes into a no, or a good price into a poor one. We choose lenders based on overlays, pricing, program flexibility and how reliably they close on time. You can read more in how brokers find better rates.
7. Show you the options side by side
Finally, we present the options that fit, together. Option 1 might have the lowest payment. Option 2 might have the least cash to close. Option 3 might cost the least over ten years. You see the trade-offs in plain numbers and make the decision.
That is what your Mortgage Plan provides: each option with its payment, cash to close, costs and long-term picture, built from your real numbers. You can start your Mortgage Plan at any time.
Why we work this way
No single loan fits everyone. The right one depends on a few details that are easy to miss: which tier your score falls in, which tier your down payment falls in, how long you will keep the loan and which lender’s rules fit your file. Getting those details right is our job.
Sources: Fannie Mae Loan-Level Price Adjustment Matrix (dated September 30, 2026). CFPB: 7 factors that determine your mortgage interest rate.
Keep reading
- Who does your loan officer really work for?How retail loan officers and Mortgage Brokers differ, how each is paid under federal rules, and what to ask before you apply.
- Using AI to buy a home: where it helps and where it falls shortHow to use AI tools well when you buy a home, and where they fall short on loan rules, local details, pricing and privacy.
- What moves mortgage rates, and what you controlThe market forces behind mortgage rates, and the personal factors that determine the rate you are actually offered.