Home Buying Steps • December 19, 2025

Start Looking at Houses — Home Buying Step 7

by Doug Berry

Flat-lay of a ‘House Hunting Notes’ checklist on a wooden desk beside a laptop, pen, and paisley bow tie keychain, representing the start of looking at houses.

Start Looking at Houses — Home Buying Step 7

How to Start Looking at Houses in the Real World

Welcome to Step 7 of my practical, experience-based Home Buying Series. If you’ve jumped in here, I strongly recommend going back to Step 1 (credit), Step 2 (budget), and Step 3 (choosing a lender). Much of what you’ll read in this step only works after those pieces are in place—especially the difference between a pre-qualification and a true pre-approval.

Most people think this is Step 1 in the buying process. That’s why so many problems appear here. By the time you start looking at houses, your loan type, budget, and underwriting picture already determine what you can—and can’t—buy.

Why You Must Be Ready Before You Start Looking at Houses

Most REALTORS® won’t start showing homes until your financing is ready. That’s not gatekeeping. It’s protecting your time, your hopes, and the hours you’d otherwise spend scrolling through houses you can’t buy.

Here’s why preparation matters:

Homes can move fast. If you can’t write an offer, you’re not in the market yet.
Your loan type quietly eliminates certain homes—even the ones that look perfect online.
Your budget filters the rest.
Your agent doesn’t want to waste your time (or theirs) showing the wrong properties.

Loan types still shape your search—even conventional loans

Historically, sellers shied away from USDA, VA, or FHA buyers because they feared repair requests triggered by the appraiser. None of this means you’re doing anything wrong as a buyer; the lending rules exist to protect you and the bank. However, here’s the part sellers don’t always realize:

Conventional loans now require repairs more often than they used to.

If an appraiser notes:

major roof damage
electrical hazards
plumbing failures
unsafe steps or missing handrails
significant rot or structural concerns

…a conventional lender can still halt the deal until repairs are made.

So the home that claims to “favor conventional buyers” may not actually be more flexible.

A quick note about “Cash Only” listings

If a listing says:

“Cash buyers only,”
“Investor special,”
“No financing available,”
“Seller will make no repairs,”

…it almost always means:

“This home will not pass underwriting.”

You’re not missing out on a deal as a financed buyer.

You’re avoiding a future money pit.

Know What You Want Before You Start Looking for a House

Your must-haves—beds, baths, square feet—are helpful, but deeper questions matter more when you start looking at houses:

New build, or older home with character?
How do you feel about HOAs and their rules?
Mature trees or a brand-new yard?
Historic charm or historic restrictions?
School districts?
Pool? Shop? Extra parking?

HOAs vary widely—some are barely noticeable, others are extremely strict. A change in leadership can change how they behave overnight, so know your tolerances. Your REALTOR® can guide you, but only you can choose your priorities.

Your “No-Go List” Is Just as Important

Often, the easiest way to narrow the field is to define what you absolutely will not live with:

Busy streets
Floodplains
Neglected neighboring properties
Certain school districts
Proximity to commercial or industrial sites
Neighborhoods with chronic drainage or noise issues

Negatives streamline your search faster than positives.

Of course, even with a clear no-go list, you’ll find surprises when you begin touring homes. And some of these—neglected properties in particular—may not be evident until you and your agent get to the neighborhood. REALTORS® aren’t all-knowing. They may never have seen the exact street you may want to look at, while they may know the neighborhood.

There Is No Perfect House — Not Even the One You Build

This is where many first-time buyers struggle. There is no perfect house.

People who build custom homes—who choose every detail—often discover that what looked amazing in blueprints doesn’t live well in reality. Stress can even change their feelings about the home before move-in.

A family example: my aunt and uncle bought a home in Lubbock designed by Frank Lloyd Wright. On paper, it should have been the pinnacle of homeownership. They said it was the most unlivable house they ever owned.

Architects sometimes design monuments to themselves, not homes that work for everyday life.

And this applies everywhere:

Beautiful kitchens with no usable counter space
Rooms that cost a fortune to heat or cool
Layouts that photograph perfectly but feel awkward in real life

You’re not looking for perfect. You’re looking for livable, functional, comfortable, and aligned with your budget.

New builds and yard-size realities

Most new-build tract homes today come with much smaller yards than older neighborhoods. Corner lots may feel larger, but they also come with more traffic and less privacy.

Everything is a tradeoff. Knowing those tradeoffs early helps manage expectations once you start looking at houses in person.

You’re Not Just Buying a House — You’re Buying the Neighborhood

This point matters more than most buyers realize. Everything outside your walls becomes part of your daily life:

Traffic patterns
Noise
Neighbor habits
Pride (or neglect) of surrounding homes

Drive the neighborhood—more than once

A quiet street at noon might become a drag strip at 9 p.m.

A peaceful area on weekends may be a school-traffic bottleneck on weekdays.

Check the neighborhood:

Early morning
Late afternoon
After dark
Weekend vs. weekday

Patterns change—and they matter.

For example, we live near a few small bars. Before COVID, one of them morphed into a motorcycle-enthusiast hangout. Not a hard-core biker bar—just a place where middle-aged guys who didn’t believe in mufflers gathered on Friday and Saturday nights. You’d never know it during the day…until you heard all the bikes fire up at 1 or 2 AM.

After COVID? No more straight pipes. The crowd disappeared, and the noise went with them.

The point is this: neighborhoods change, sometimes in very specific ways, and things that aren’t obvious during a daytime showing can become big issues—or no issue at all—once you move in.

And no, your REALTOR® probably doesn’t know what every neighborhood looks like after dark. Unless they have a big “S” on their chest.

Talk to the neighbors. Really.

You can do something your REALTOR® cannot legally do: knock on doors and ask questions.

Most neighbors will talk. People love sharing what they know—sometimes more than you expected.

A few real-world examples:

The sewer-line surprise
A neighbor once casually asked a buyer:
“Did they ever fix that sewer line problem?”
No listing sheet will give you that.

The “murderer next door” situation
Years ago, my parents toured a home where a murder had occurred. The seller disclosed the murder.
What wasn’t disclosed?
The murderer now lived in a shack next door.
A neighbor volunteered that detail.

The “creepy neighbor” test
If a neighbor makes you uncomfortable during a simple introduction, imagine living next to them. There’s no inspection for neighbor behavior.

The overly watchful neighborhood
One of my first listings was in a tight-knit, older area. Within minutes, several elderly neighbors came outside to “check” what I was doing. They watched out for each other—which can be wonderful. It also means they’ll watch you.

Listing Language: What it Really Means When You Start Looking at Houses

Even before you start looking at houses in person, listing language gives clues:

“Cozy” = small
“Needs TLC” = bring money
“Investor special” = major repairs (bring more money)
“Fixer-upper” = not financeable (bring a wheelbarrow of money)
“As-is” = seller will not negotiate repairs (which is not always true, after inspections)

This isn’t meant to scare you. You just need to be aware of phrases that seasoned agents recognize instantly. You don’t have to decode every adjective in a listing—but understand that real estate has its own shorthand.

And here’s a new wrinkle: with the increased use of AI to write listing descriptions, these “tell” phrases may start appearing in places where they don’t actually apply. Some descriptions are now generated by systems that don’t fully understand the nuance of a neighborhood or the condition of a property. So read listing language thoughtfully—but don’t rely on it as gospel.

Lease Timing: An Overlooked Part of Starting to Look at Houses

This topic rarely makes home-buying guides, but it matters more than people think:

If you’re approaching the end of your lease and thinking about buying, consider going month-to-month rather than signing a new 6- or 12-month lease. Sometimes being upfront—“we’re looking for houses” or “we’re about to start looking at houses”—will help your landlord understand your situation and make accommodations. Sometimes not. Not every complex offers month-to-month terms, but it’s worth asking.

When my wife and I bought our first home, we were still locked into a lease with four months remaining. Even after the apartment was re-rented, the complex made it incredibly difficult to leave without penalty.

Month-to-month would have cost more each month, but it would have saved far more overall—and given us the flexibility buyers desperately need.

Balancing Expectations When You Start Looking at Houses

You will compromise. Everyone does. The goal is understanding which compromises are acceptable:

Layout vs. location
Yard size vs. interior space
Newer home vs. older home
Condition vs. price
Quiet street vs. convenience

Because you’ve:

understood your credit
built a realistic budget
secured pre-approval
learned your loan type
fixed underwriting issues
chosen a REALTOR®
studied property-condition rules

…you’re now looking at homes you can realistically buy—not aspirational “dream homes” designed to keep you scrolling.

And a quick note:
BHGRE is rolling out AI-powered search tools that should make finding homes easier than ever. The days of crafting complex MLS filters may soon be behind us.

Why Step 7 Matters

Step 7 is where preparation turns into action. This is the moment when the houses you walk into finally connect with your budget, your loan, your comfort level, and your long-term plans.

In the next step, we’ll talk about how to narrow the field so you can compare homes objectively, avoid chasing the wrong property, and confidently identify the right one.

If you have questions about what you should be doing when you start looking at houses—or want another set of eyes on a neighborhood or listing—give me a shout. I’m always glad to help buyers make informed, comfortable decisions.

Doug Berry, REALTOR®, wearing a bow tie and smiling.

About Me — Doug Berry, MBA, REALTOR®

The Bow Tie Agent

I’m a REALTOR® with Better Homes & Gardens Senter, REALTORS® who focuses on helping buyers understand the real-world side of homeownership — from lending and budgeting to navigating underwriting without surprises. With an MBA and experience as a lender with USDA Rural Development’s mortgage programs, I approach the process the same way I do with clients: clearly, calmly, and without sales pressure.

If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:

📧 Doug@senterrealtors.com

📞 325-338-9734

🌐 www.dougberry.realtor

Loan Programs • December 18, 2025

USDA Direct Loans Explained — A Practical Guide from Someone Who Worked Inside the Program

by Doug Berry

USDA Direct Loans are one of the least understood homeownership programs in the country. They offer a path to owning a home for people who often have no other financing options — but they come with rules, limits, and long-term obligations you need to understand before you apply. If you’re just looking for a broad overview of loan types, you should start here and return to this article if you need a deep dive.

I worked for USDA Rural Development on the Single-Family Housing Direct program, reviewing applications from across Texas. What I learned is this: the program can be life-changing if you qualify and if you understand how it really works.

If you’re considering USDA Direct, start with the agency’s official page:
USDA Single-Family Housing Direct Home Loans

I also strongly recommend reading my entire Home Buying Series — especially Step 2: Budgeting. USDA Direct uses different assumptions than traditional lenders, and some “don’t do this” situations in my budgeting tool may still qualify under USDA rules. That’s both the opportunity and the risk of this program.

Who USDA Direct Is Designed For

USDA Direct is only for buyers who meet all of the following criteria:

Very-low income or low income (based on adjusted household income)
Purchasing in a rural eligible area (population under 20,000)
Buying a home that meets the agency’s decent, safe, and sanitary standards
Unable to obtain traditional financing

These requirements work together, and falling outside even one of them will usually make a borrower ineligible for USDA Direct. USDA Direct is, by regulation, a lender of last resort. Borrowers must be unable to obtain credit from other lenders on reasonable terms. If a bank or mortgage lender can approve you for a loan, USDA Direct cannot. That’s how all USDA lending programs are structured — from individual borrowers to municipal projects.

Also, notice the phrase “household income,” not borrower income. That distinction matters.

Income Limits: Household vs Borrower Income

One of the biggest surprises for applicants is that USDA Direct looks at household income, not just the income of the people on the loan. That means every dollar earned by everyone who will live in the home is counted when determining eligibility.

This includes:

Adult children living at home
Parents or grandparents with Social Security income
Family members with part-time or seasonal jobs
Anyone who contributes income and will reside in the property

Even if someone isn’t on the loan, their income still affects your USDA Direct eligibility.

On the other hand, I’ve also seen multi-generational households qualify together because their combined income stayed within the limits. But that can be risky. If you are depending on a household member’s income to make the mortgage payment and that person dies, moves away, or has a change in employment, you may find yourself unable to maintain the loan.

USDA uses adjusted household income, meaning certain deductions are allowed (dependents, childcare expenses, medical expenses for elderly households, etc.). But the starting point is still the total income of everyone in the household.

Below are the Fiscal Year 2025 (ended September 30, 2025) income limits for the Abilene, Texas MSA (Taylor County).

These limits apply only to USDA Direct and Guaranteed loans. Other programs (FHA, VA, Conventional) do not use household income limits.

A key takeaway: If someone else in your home earns income, it may either push you over the limit — or help you qualify, depending on the program.

FY 2025 Adjusted Income Limits — Abilene, TX MSA (Example)

Program	1–4 Person Household	5–8 Person Household
Very Low Income	$43,650	$57,650
Low Income	$69,850	$92,250
Moderate Income (Guaranteed Program)	$119,850	$158,250
38-Year Term Eligibility	$52,400	$69,200

These limits vary by location — check USDA’s website for your county.

Geographic Eligibility: “Abilene Address” Doesn’t Mean Eligible

USDA Direct (and USDA Guaranteed) loans can only be used in rural-eligible areas, which generally means communities with a population under 20,000. For many buyers, that definition creates confusion — especially in places like Abilene.

Here’s the part most people don’t realize:

Homes inside the Abilene city limits are not eligible for USDA Direct or Guaranteed loans.

But some homes with an Abilene mailing address are eligible because they sit outside the incorporated city limits in rural or semi-rural areas.

This is why you must check every individual address you’re considering. A ZIP code alone won’t tell you anything — and neither will the mailing city name.

The USDA property eligibility map is not intuitive. You have to select the “Property Eligibility” tab before the map even appears. (See image below with the arrow pointing to the tab.)

Once on the map, you can:

Enter a specific address
Zoom in on areas
Compare the ineligible zones (highlighted in orange) to the surrounding eligible regions

Eligible areas don’t guarantee that a specific property will qualify. The home itself must also meet USDA’s standards for decent, safe, and sanitary housing.

For example, I once saw a deal fail even though the address was fully eligible — because the home sat on a private road that did not have an all-weather surface. USDA could not lend on it. Issues like that are more common than most buyers realize.

If you’re searching in or around Abilene, or any metro area that is ineligible, assume nothing. Always check the map, and always check the exact address.

Screenshot of the USDA Rural Development Single Family Housing Self-Assessment page with a red arrow pointing to the “Property Eligibility” tab, showing where to click to access eligibility maps.

Click the “Property Eligibility” tab to open USDA’s eligibility map — you must check every address to confirm whether a property qualifies for USDA Direct or Guaranteed loans.

USDA Property Eligibility Map showing Abilene, Texas, with the city limits shaded in orange as ineligible and surrounding rural areas displayed as potentially eligible for USDA loans.

The USDA eligibility map highlights ineligible areas in orange—zoom in or search a specific address to verify whether a home may qualify. An Abilene address isn’t always located inside Abilene’s ineligible city limits.

Why USDA Direct Is Harder Than It Looks

The application process itself isn’t especially complicated. What makes USDA Direct difficult is the market reality, not the paperwork.

I reviewed countless applications where the buyer technically qualified — but the amount they qualified for would not buy a house in “decent, safe, and sanitary” condition. Affordable rural housing stock has shrunk dramatically, especially since the 2020 market shift. Areas around Abilene, TX — my hometown — that used to be cheap are becoming nearly as expensive as Abilene, especially with the bump in prices during COVID and the housing shortage caused by the temporary influx of workers building the new AI facility.

In other words: eligibility is one thing; finding a house you can actually buy is another.

USDA Direct can work beautifully. But the search is usually tough, and the timelines slow.

Loan Terms: 33 or 38 Years

USDA Direct loans work differently from traditional mortgages when it comes to loan terms. The standard term is:

33 years for most borrowers
30 years for manufactured homes
38 years for very-low-income borrowers who need a longer term to achieve an affordable payment

Longer terms lower the monthly payment, which is the point — the program is designed to make homeownership possible for households that cannot qualify anywhere else. But there’s a tradeoff: the longer the term, the more interest you pay over the life of the loan.

A 38-year mortgage may make a home affordable today, but buyers must understand that it also increases the long-term cost of the loan significantly.

USDA determines eligibility for the 38-year term strictly by income. Only very-low-income borrowers may use it, and only when the 33-year term would make the payment unaffordable under USDA’s formula.

Bottom line: USDA’s longer terms are tools to reduce your monthly payment — not to reduce what you owe overall.

How Payment Subsidies Really Work

The biggest misunderstanding I saw in the USDA Direct program is the meaning of the word “subsidy.” Many applicants assumed it worked like Section 8 — a monthly reduction in payment that never has to be repaid.

That is not how USDA Direct works.

Here’s what actually happens:

USDA may reduce your effective interest rate — sometimes down to as low as 1%.
The difference between your subsidized rate and the market rate becomes a deferred loan.
That deferred amount accumulates over time.
You repay it when you sell, refinance, or pay off the mortgage.

Subsidy Recapture Isn’t Optional

This means a borrower could make payments for decades and still owe tens of thousands of dollars in subsidy recapture at payoff — not because anything went wrong, but because that is simply how the program is structured.

USDA-Rural Development will sometimes offer a reduced payoff amount if the subsidy is paid in a lump sum, such as during refinancing. But borrowers should never assume subsidy is “free money.” It is not grant assistance. It is a loan.

The subsidy isn’t reducing what you owe — it’s reducing what you pay each month.
Those are not the same thing.

This is why borrowers must understand the long-term obligation before entering the program. USDA Direct can make a home affordable today, but the repayment obligation follows you until the last dollar is satisfied.

The one upside is that the subsidy doesn’t earn interest. It’s simply the difference between the lower, subsidized rate you paid each month and the full interest you would have paid at the note rate. That amount becomes a deferred, interest-free loan that you repay when you sell, refinance, or pay off the home. In this sense, it truly is a subsidy — you benefit from reduced payments without the subsidy itself accruing additional interest.

The Part No One Tells You: You Cannot Walk Away

A USDA Direct debt does not disappear unless it is paid in full. If a borrower defaults and the loan is accelerated, USDA will pursue collection through the Treasury Offset Program. That means:

Your future federal tax refunds can be intercepted.
Your Social Security benefits can be garnished.
The debt remains owed to the federal government indefinitely.

Unlike private lenders, the federal government does not face statutes of limitation in the same way, which means the debt remains collectible for life. If the borrower dies still owing a balance, USDA may collect from the borrower’s estate.

So yes — in practical terms, a USDA Direct debt follows you until it is repaid or until you die.

In practice, USDA will sometimes forgive or reduce certain amounts when a borrower sells the property for less than the balance, or when a borrower successfully refinances out of the Direct program. But that is very different from walking away.

If you default and abandon the loan, USDA is unlikely to write anything off. The debt is turned over to the Treasury Department for collection, and it will remain collectible until it is paid. Treasury can intercept tax refunds, garnish Social Security, and pursue the balance for the rest of your life. Only then, or upon your death, does the obligation end—unless USDA voluntarily settles or compromises the debt, which is rare when the borrower simply walked away.

I’ve even seen situations where borrowers could have walked away from USDA Direct with money in their pocket — but didn’t realize it. In one case from my office, the homeowner was falling behind and believed foreclosure was inevitable. In reality, the property was worth more than the remaining loan balance plus the subsidy they owed. They were advised to sell, settle the debt, and keep the remaining equity.

Because the process felt overwhelming and they didn’t fully understand their options, they walked away instead. USDA ultimately foreclosed, and the government recovered the equity — equity that could have helped the borrower rebuild.

This isn’t about intelligence or effort. It’s about how confusing and intimidating these situations feel when you’re stressed and don’t have someone in your corner explaining the implications clearly. One of the biggest risks with USDA Direct is not the loan itself — it’s not having the information or confidence to make the right move when things get hard.

Closing Timelines Are Slow — Even When Funds Exist

USDA is not a bank with a vault.

Every dollar for a USDA Direct loan comes from the U.S. Treasury and depends on annual federal appropriations — not on deposits, reserves, or internal lending capital. Because of that, the program operates on a completely different timeline than traditional lenders.

That means:

Government shutdowns can delay closings.
Funding lapses can pause approvals.
Even in normal times, Direct loans often take 50–100% longer to close than Conventional or FHA/VA loans.

But even when funding is available, USDA Direct loans still move slowly for another reason:

The USDA must approve every step in-house.
Unlike banks, mortgage companies, or credit unions, USDA processes, verifies, and signs off on every part of the loan internally. Many field offices have extremely small staffs — sometimes just one or two people covering multiple counties. Every application, clarification, income verification, and final approval flows through the same tiny team.

The workload is enormous, and staffing levels rarely match the demand.

When you combine:

centralized in-house processing,
small regional staff, and
reliance on federal Treasury funding,

…it becomes clear why USDA Direct timelines are significantly slower than USDA Guaranteed, FHA, VA, or conventional mortgages.

Most borrowers should expect 6–8 week closings — sometimes longer.
Some sellers hesitate to accept USDA Direct offers because of these timelines, so buyers should be prepared to set expectations early and have their documentation ready well in advance.

How USDA Direct Differs from USDA Guaranteed, FHA, VA, and Conventional Loans

Here’s the simplest breakdown:

Conventional: Fastest closings, flexible conditions, but higher credit/income requirements.
FHA: Low down payment, more property repairs required.
VA: No down payment, great for veterans, strict appraisal standards.
USDA Guaranteed: No down payment, faster than Direct, processed by traditional lenders.
USDA Direct: For very-low and low-income buyers, slowest closing, strict requirements, and subsidy repayment.

Conventional → Faster.
FHA/VA/USDA Guaranteed → Middle tier.
USDA Direct → Slowest.

If You’re Considering USDA Direct Loans, Start With Your Budget

USDA Direct takes significant steps to make sure a borrower’s payment is workable. The agency reviews income, expenses, dependents, household members, and long-term affordability far more carefully than most traditional lenders. On paper, USDA wants the payment to fit — and they do everything they can to structure it responsibly.

But here is the truth borrowers that don’t always hear:

USDA Direct loans often sit right on the edge of what a household can sustain.

That isn’t because the program is poorly designed. It’s because Direct exists precisely for people who cannot qualify anywhere else. A bank, credit union, or mortgage company would simply decline these applicants — not because they don’t deserve a home, but because the financial margin is too thin for traditional underwriting models.

USDA steps in because no one else will.

But that means the borrower must be even more careful.

Why You Should Still Use My Budget Tool

USDA’s affordability test assumes:

Your income will increase over time
Your expenses will remain mostly stable
Your household composition won’t unexpectedly shift
Your home will not require major repairs early on

All of those might hold true… or they might not.

But USDA structures Direct loans with the expectation that a borrower’s financial situation will improve over time, eventually allowing them to graduate into conventional financing–whether with USDA-Guaranteed or another product.

My Step 2 “Budget That Tells the Truth ” tool gives you a real-world version of affordability — one that assumes:

cars break down,
electricity bills spike,
kids need things at school,
roofs leak,
hours get cut,
and life does not follow neat government worksheets.

USDA’s affordability calculation is designed to determine whether you fit the program — not whether the payment fits your life. That’s why Step 2 of my Home Buying Series is so important. Even if USDA approves you, your own budget must leave room for repairs, emergencies, and rising costs — because USDA cannot prevent the unexpected.

Your goal is not simply to buy. Your goal is to stay housed — something USDA Direct loans are designed to support, but only when the borrower understands the limits

USDA Wants You to Succeed — But You MUST Reach Out

This part is critical:

USDA Direct borrowers must contact USDA at the first sign of financial trouble.

The agency has multiple tools — payment assistance adjustments, moratoriums, re-amortizations — but they can only help if you communicate early.

USDA can help you if you reach out early — but they cannot help you if your file goes silent.

Officially, servicing requests are handled through the national servicing center in St. Louis.
In reality — and this is where experience matters — many smaller field offices do their best to guide borrowers through the process or point them toward the right forms and steps, because those offices know the borrowers personally and want them to succeed.

But in larger offices with heavy caseloads, that hands-on help is much harder. Borrowers must be proactive.

If you disappear, the system assumes you are choosing not to pay — not that you don’t know what to do.

Bottom Line

USDA Direct is a remarkable program for the households it serves, but it also requires:

caution,
honest budgeting,
clear understanding of risk, and
early communication if hardship arises.

Use USDA’s affordability test — but also use your budget to decide whether the payment fits your life, not just your paperwork.

Final Thoughts

USDA Direct can be an incredible program for the right family in the right situation. It can also be overwhelming, confusing, and risky if entered blindly.

USDA expects most Direct loan recipients to graduate — get better paying jobs, be more financially secure — so that they get moved into more traditional products… The program was never envisioned as one where you got a loan and stayed in it until it was paid off. The reality of rural economics means that a lot of people do stay in the program until payoff.

If you’d like help navigating your options, budget, or eligibility — or you simply want someone who understands the program from the inside — I’m always happy to talk.

About Me — Doug Berry, MBA, REALTOR®

The Bow Tie Agent

I’m a REALTOR® with Better Homes & Gardens Senter, Realtors who focuses on helping buyers understand the real-world side of homeownership — from lending and budgeting to navigating underwriting without surprises. With an MBA and experience as a lender with USDA Rural Development’s mortgage programs, I approach the process the same way I do with clients: clearly, calmly, and without sales pressure.

If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:

📧 Doug@senterrealtors.com

📞 325-338-9734

🌐 www.dougberry.realtor

Home Buying Steps • December 17, 2025

Mortgage Types Explained for Buyers | Home Buying Step 6

by Doug Berry

Top-down view of a clipboard labeled ‘Mortgage Types’ on a wooden desk, with a paisley bow-tie keychain, glasses, phone, pen, and mortgage documents—matching The Bow Tie Agent branding.

Let’s Talk Mortgage Types: Conventional, VA, FHA, USDA and More. Step 6 in my practical, experience-based Home Buying Series is all about mortgage types–so this is where you finally get Mortgage Types Explained in a real-world way. By now, you’ve done more work than most first-time buyers ever do: you’ve checked your credit, built a real-world budget, chosen a lender, fixed any underwriting issues, and hired a REALTOR® who works for you. Now it’s time to look at mortgage types—because the loan you use often determines which homes you can realistically buy.

Related steps in this series: Step 1 — Know Your Credit, Step 2 — Build a Budget That Tells the Truth, Step 3 — Choose a Lender, Step 4 — Fixing Underwriting Issues, Step 5 — How to Choose a REALTOR®.

Mortgage Types Explained: What You Need to Know Before You Start Looking at Houses

Mortgage types and property choices are tied together. Some loan programs don’t like “fixer uppers.” Others limit where you can buy, how you can occupy the home, or what condition it must be in at closing. Those rules can kill a deal late in the game if you ignore them up front.

If you’re using USDA, you’ll be looking in areas that meet USDA’s rural definition—generally communities or unincorporated areas with populations under 20,000. It’s not just tiny towns; sometimes it’s the edges of major metro areas. If you’re using FHA, VA, or USDA, the property must meet stricter condition standards. True “fixer uppers” usually don’t qualify.

Thanks to home-flipping shows, most real fixers never hit the regular market anyway. They’re sold to “We Buy Ugly Houses”-type outfits or to the REALTOR® who went out to talk to the owner about listing the property in the first place.

Bottom line: your loan program shapes your home search. That’s why we’re talking about mortgage types before we start opening doors in Step 7.

The Big Mortgage Types Most Buyers Hear About

Most first-time buyers end up looking at some combination of:

Conventional loans (backed by Fannie Mae/Freddie Mac)
FHA loans (Federal Housing Administration)
VA loans (Department of Veterans Affairs)
USDA Guaranteed loans (rural housing, through regular lenders)

There are also jumbo loans (for amounts above standard loan limits), adjustable-rate mortgages (ARMs), and a variety of in-house or specialty programs that banks and credit unions offer—sometimes quietly.

We’ll hit the highlights of each, then talk about one of the most misunderstood parts of the mortgage world: mortgage insurance.

Conventional Loans: The “Plain Vanilla” Mortgage

For many borrowers, a conventional loan is the default option. These loans follow guidelines set by Fannie Mae and Freddie Mac and are what most people think of when they hear “standard mortgage.”

Typical features:

Often 3%–5% down for well-qualified first-time buyers (20% down is ideal, not required).
Flexible on property type and condition compared to FHA/VA/USDA, but still subject to appraisal and basic safety standards.
Available with fixed or adjustable rates (we’ll talk about ARMs in a moment).

Conventional loans can be a great fit if your credit is solid, your debt-to-income ratio is reasonable, and you’re buying a home in good condition.

FHA Loans: Lower Down Payment, Tighter Property Rules

FHA loans are designed to help buyers who may have lower credit scores, smaller down payments, or more complex financial histories.

Typical features:

Minimum 3.5% down payment for most borrowers.
More forgiving of past credit issues than conventional in many cases.
Stricter property standards—FHA wants the home to be “safe, sound, and secure.” Major deferred maintenance can be a problem.

Because of the property rules, FHA is not a fixer-upper loan. If the home needs obvious repairs, the seller may have to fix them for the loan to close.

VA Loans: A Powerful Benefit for Veterans and Eligible Service Members

In a military town like Abilene, VA loans matter. They’re one of the best benefits available to eligible veterans, active-duty service members, and certain surviving spouses.

Typical features:

Often 0% down—true 100% financing for qualified borrowers.
No monthly mortgage insurance, though there is usually a VA funding fee (which can be financed).
Property condition standards similar to, and sometimes stricter than, FHA.

Not every seller is excited to see VA on an offer because they know repairs may be required and closing costs may shift. When I work with sellers—especially veterans—I always encourage them to consider VA offers seriously. In a town with a large retired-military population, turning away VA buyers means turning away people who have served 20+ years and earned that benefit.

USDA Guaranteed Loans: Rural, Not Farm

USDA offers two main home loan programs. The one most buyers see is the USDA Guaranteed loan, which is issued by regular lenders and backed by USDA.

Typical features:

Generally 0% down for eligible borrowers.
Income limits and location requirements—the home must be in an eligible rural area.
Property condition standards similar to FHA/VA.

If you’re open to buying just outside town, USDA Guaranteed can be a powerful option. You or your lender can quickly check whether a specific property address is in an eligible area.

USDA Direct Loans: Powerful but Complicated

The other program is USDA Direct. I used to work for USDA Rural Development on the Direct side, and I can tell you: it’s a very different animal.

USDA Direct is aimed at very-low- and low-income buyers purchasing in rural areas. The government is the lender, not a bank. Terms can stretch to 33 or even 38 years, and some borrowers qualify for payment assistance that reduces their effective interest rate—sometimes as low as 1%.

That sounds great, but there are tradeoffs:

Finding “decent, safe, and sanitary” housing in the price range can be difficult.
The payment assistance is deferred interest, not free money. It often has to be repaid when you sell, refinance, or pay off the home.
Because your lender is the federal government, walking away is not an option—old debts can follow you into tax refunds and even Social Security benefits.
Closings are slow. USDA is not a bank with a vault; funds come from the U.S. Treasury. Government shutdowns and funding gaps can delay everything.

If USDA Direct is your only path to homeownership, it can still be worth pursuing—but you need to go in with eyes wide open. I’ve written a deeper dive into USDA-Direct Loans: You can find it here.

Now that you’ve seen Mortgage Types Explained across the major programs, it becomes clear why your lender and REALTOR® help narrow the field early.

Specialty and In-House Loan Programs

Many lenders offer products that don’t fit neatly into the big four categories.

Examples I’ve seen include:

A minority-majority loan aimed at minority borrowers purchasing in census tracts that are just over 50% minority.
Programs for borrowers with Individual Taxpayer Identification Numbers (ITINs) instead of Social Security numbers—often used by Dreamers/DACA recipients and other non-citizens.
Down payment assistance and first-time buyer programs from groups like the Texas State Affordable Housing Corporation (TSAHC) and even city-level initiatives.

These programs can be extremely helpful—but they usually come with income limits, purchase price caps, and location rules. When your budget is already tight, meeting every requirement can be challenging.

My number one piece of advice here is simple:

Always ask your lender: “Do I qualify for any other programs—either in-house or external—and how do they compare to a conventional loan in both monthly payment and total cost over the life of the loan?” While your Realtor may know about some programs, your lender is your go-to reference.

A good lender will walk you through several scenarios, not just push the one product they like best.

Adjustable-Rate Mortgages (ARMs): Why I’m Cautious

ARMs still exist, and in some situations they can make sense. But we can’t talk about mortgage types without remembering the housing crisis in the 2000s. A big part of that mess came from poorly underwritten ARMs—teaser rates that looked affordable for a few years and then reset to painful levels.

ARMs are built on a story: “You’ll be making more money later,” or “You’ll sell or refinance before the rate adjusts,” or “Maybe a rich relative will leave you something.” Those are all aspirational. They’re not guaranteed.

My advice is straightforward: buy the house you can comfortably afford today. If your income improves or your situation changes, you can upgrade later. Betting your home on the future is a risky move.

Jumbo Loans and Other Outliers

If you’re buying a higher-priced property that exceeds standard loan limits, you may be looking at a jumbo loan. These often require:

Larger down payments,
Stronger credit, and
More cash reserves.

Most first-time buyers in my market won’t be dealing with jumbo loans, but if you are, expect tighter underwriting and fewer “creative” options.

Mortgage Insurance: Who It Really Protects

The word “insurance” makes a lot of people think, “If something goes wrong, this pays off my house.” That’s not what mortgage insurance does.

Mortgage insurance exists to protect the lender when you can’t put 20% down. You’re paying the premiums; the lender gets the protection.

Mortgage Insurance on Conventional Loans (PMI)

On most conventional loans with less than 20% down, you’ll pay private mortgage insurance (PMI). Key points:

PMI is usually a monthly fee added to your payment.
Once your loan balance drops to around 80% of the home’s value (sometimes sooner with appreciation and a new appraisal), PMI can often be removed.
That means PMI on a conventional loan is usually temporary.

Mortgage Insurance on FHA Loans (MIP)

FHA loans use a different structure called Mortgage Insurance Premium (MIP):

An upfront MIP amount (usually financed into the loan), and
An ongoing monthly MIP added to your payment.

Depending on your down payment and term, FHA’s monthly MIP may last for the entire life of the loan. That can make FHA more expensive long-term, even when the monthly payment looks attractive up front.

USDA and VA: Different Names, Same Idea

USDA Guaranteed and VA loans don’t use the word “mortgage insurance” as prominently, but they still have fees that serve a similar purpose:

VA loans usually have a funding fee (which can be waived for some disabled vets).
USDA Guaranteed loans typically have a guarantee fee and a modest annual fee built into the payment.

Those fees help protect the agencies that are backing the loans when borrowers default. They’re not bad or sneaky—but you should understand that you’re paying them to make the loan possible, not to insure you.

Putting the Mortgage Types Together

The question isn’t, “What’s the best mortgage type?” It’s, “What’s the best fit for my budget, my location, my timeframe, and my long-term plans?”

For one buyer, that might be a conventional loan with 5% down and PMI that drops off in a few years. For another, it might be FHA because of recent credit bumps. For a veteran, VA often wins by a mile. For someone willing to live just outside town, USDA Guaranteed might offer 0% down with a manageable payment.

Once again, your choice of lender is crucial. A good loan officer will:

Lay out the programs you actually qualify for,
Show you the monthly payment and total cost over the life of each option, and
Talk honestly about how property condition and location affect which mortgage types will work.

Not every buyer will end up with a complicated decision. Many people will simply land on a straightforward conventional loan. But you should know what else is possible before you sign.

Looking Ahead to Step 7

If you missed the earlier parts of this series, I strongly recommend going back—especially to Step 2 on budgeting. Your budget determines what loans work for you. The more you know about your finances and your options, the easier it is to make a good choice.

In the next step, we’ll finally do what most people think is Step 1: start opening doors and looking at houses that fit your budget, your loan type, and your long-term plans.

If you have questions about mortgage types, or you want to talk through how different loans might work in your specific situation, I’m always happy to help.

About Me — Doug Berry, MBA, REALTOR®

The Bow Tie Agent

I’m a REALTOR® with Better Homes & Gardens Senter, REALTORS® who focuses on helping buyers understand the real-world side of homeownership — from lending and budgeting to navigating underwriting without surprises. With an MBA (Marketing concentration) and experience as a lender with USDA Rural Development’s mortgage programs, I approach the process the same way I do with clients: clearly, calmly, and without sales pressure.

If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:

📧 Doug@senterrealtors.com

📞 325-338-9734

🌐 www.dougberry.realtor

Home Buying Steps • December 15, 2025

How to Choose a Realtor Who Works for You — Home Buying Step 5

by Doug Berry

Clipboard labeled “Realtor Shortlist” on a wooden desk with a paisley bow tie keychain, phone, glasses, plant, and real estate brochure — representing how to choose a Realtor

How to Choose a Realtor Who Works for You — Home Buying Step 5

How to Choose a Realtor is one of the most important decisions you’ll make in the home-buying process, and it belongs later in the journey than most people think. By now, you’ve done more work than most first-time buyers ever do: you’ve checked your credit, built a real-world budget, talked to a lender, and learned what happens when underwriting says “not yet” instead of “no.”

Logically, Step 3 (choosing your lender) and Step 4 (fixing underwriting issues) might seem to lead straight into a discussion of loan types. And we will talk about FHA, USDA, VA, and Conventional programs—but not yet. Before any of that makes sense, you need the right REALTOR® in your corner.

Loan programs and property choices are tied together in ways most buyers don’t see at first. Your REALTOR® is the person who makes sure the homes you look at actually fit the loan type you qualify for. You need your professional team—lender and REALTOR®—working together with you, for you, and looking out for your best interests.

This step is about choosing that REALTOR®: your partner, advocate, and guide for the rest of the process.

Related steps in this series: Step 1 — Know Your Credit, Step 2 — Build a Budget That Tells the Truth, Step 3 — Choose a Lender, Step 4 — Fixing Underwriting Issues.

Why How to Choose a Realtor Comes Before Loan Types

Most online guides talk about loan types as if they exist in their own little box. In the real world, loan programs come with requirements about property condition, location, occupancy, and appraisal that can kill a deal late in the game.

Your lender can tell you which loan program you qualify for. Your REALTOR® helps make sure the homes you’re seeing actually work with that program. If you pick the wrong agent—or no agent—you can easily fall in love with houses your financing will never approve.

That’s why choosing the right REALTOR® comes before diving into the alphabet soup of FHA, USDA, VA, and Conventional loans.

Realtor vs. Real Estate Agent (and Why the MLS Matters)

One thing many buyers don’t realize is that not every real estate agent is a REALTOR®.

A real estate agent (or salesperson) is someone who has a state-issued license to practice real estate.
A REALTOR® is a licensed agent who is also a member of the National Association of REALTORS®, agrees to follow a Code of Ethics, and typically has access to the local association’s MLS.

The Multiple Listing Service (MLS) is a shared database where REALTORS® list properties for sale and where buyer’s agents search for homes that meet your criteria. It includes detailed property information, photos, history, and data on comparable sales. We’ll do a deeper dive on how to use the MLS strategically in the home search step, but for now, understand this:

Working with a REALTOR® means your agent can see more, compare more, and interpret more about the homes you’re considering than someone working without full MLS access.

Why Finding the Right Buyer’s Agent Matters

Where I live, you can’t throw a rock without hitting three real estate agents. That doesn’t mean all three are qualified to guide you through the largest purchase you’ll probably ever make.

A buyer’s agent isn’t just someone who unlocks doors and points out granite countertops. A good buyer’s REALTOR® is:

your interpreter when the market doesn’t make sense,
your guardrail when emotions try to outrun your budget,
your strategist when offers and contingencies get complicated, and
your advocate when it’s time to negotiate price and repairs.

People often hesitate to work with a newer REALTOR®, but a diligent new agent will outperform a burned-out veteran every time. As my father always asked:

“Do they have ten years of experience, or one year ten times?”

When you’re deciding how to choose a Realtor, you’re not just picking a name—you’re picking a level of energy, honesty, and follow-through.

How to Choose a Realtor You Can Actually Talk To

Your lender will know your financial details. Your REALTOR® will know everything else.

Your REALTOR® will know how you handle stress, how you make decisions, how you and your partner differ, and where your real “no-go” lines are. That means competence and trust matter more than familiarity.

Just because someone is your coworker, your mom’s friend, someone from church, or your kid’s coach does not make them the right choice. Ask yourself:

Am I comfortable being completely honest about my finances and fears with this person?
Will they tell me the truth, even when it’s not what I want to hear?
Do I trust them not to overshare my business with others?

Sometimes the most respectful thing you can say is:

“Hey, you’re a great friend, but I’m really not comfortable having you know everything about my finances.”

Likewise, do you want to take the chance that your mom’s friend won’t tell your mom all your business—or steer you toward a home that fits your mom more than it fits you?

When you think about how to choose a REALTOR®, remember: you’re not choosing based on who you see every Sunday. You’re choosing based on who can be trusted with your money, your information, and your future.

Questions to Ask When You’re Deciding How to Choose a Realtor

How do they communicate—and do they actually return calls?

Real estate moves fast, and communication matters more than most buyers realize. I was trained to text, email, and follow up with a call. People may not love talking on the phone these days, but here’s the truth:

Sometimes I can tell you something faster—and more clearly—than I can type it.

You need an agent who understands that different situations call for different forms of communication:

Texts for quick confirmations
Email for documentation
Phone calls for anything urgent, complex, or sensitive

And yes, you should absolutely expect your agent to return calls.

If you call three agents and only one answers (or calls back)—that tells you a lot.

You want someone who stays reachable, even if they’re out showing homes or in a meeting. No one can answer every call in real time, but a good REALTOR® doesn’t disappear.

Responsiveness before you’re under contract is a preview of what you’ll get when deadlines start hitting. If they’re flaky now, they’ll be worse later.

Credentials: What do they really mean?

NAR designations look good on a business card, and many of them provide solid continuing education. They show commitment to the profession, and that matters.

But the question you need to ask is simple:

Does the designation represent real depth of knowledge—or just a four-to-eight-hour class?

For example, I have an MBA with a concentration in marketing, which included graduate-level coursework in professional sales and negotiation. That’s a very different foundation than a one-day seminar. It doesn’t make me “better” than someone without it—but it does mean I approach pricing, negotiation, and strategy with more formal training behind me.

So when you’re deciding how to choose a Realtor, look at:

Experience
Judgment
Education (both formal and industry-specific)
How seriously they take professional development

Those things matter far more than long acronyms on a yard sign.

Ask them what they don’t do—and listen carefully.

No REALTOR® is good at everything. Anyone who claims to be is selling something.

If a client wants to pursue a type of property or a geographic area that I don’t know well, I’ll either:

refer them to another agent in my office, or
partner with someone who specializes in that area so I can learn while ensuring they get the right representation.

Most agents won’t do this—they’ll chase the commission even if it’s outside their lane.

A great question to ask is:

“What types of clients or properties do you NOT take on?”

If they have a thoughtful answer, you’ve found someone with self-awareness—and that usually means integrity.

How a Realtor’s Network Works for You

One more thing: A good Realtor has a network—and knows how to use it.

Sometimes the right answer isn’t “I can help you.” Sometimes it’s, “I know the person who can.”

Through Better Homes and Gardens Real Estate, I’m part of a nationwide (and international) network. If you’re moving somewhere I don’t know well enough to represent you confidently, I can refer you to someone who does.

And yes, for transparency: when a referred client buys through the receiving agent, the referring REALTOR® earns a commission. That’s standard.

But here’s the part most buyers never hear:

A good referring REALTOR® will actually interview the agent they’re sending you to. They should be vetting the agent—not just handing you a name.

I know this firsthand because I’ve been on the other side of it.

A few years ago, I got a call from a Better Homes and Gardens agent in the Dallas–Fort Worth area whose friends—an LGBTQ+ couple—were relocating to Abilene. Given that this is rural West Texas, in a town with three church-affiliated universities, they understandably didn’t want to walk into a brokerage cold.

The referring agent interviewed me, asked about my approach, communication style, and comfort level, and decided I was the right fit for their friends. And it worked—we clicked.

I can work with almost anyone (I won’t say everyone—we all meet one or two people we just don’t vibe with), but the crucial part is this:

A good referral helps clients land somewhere safe, respected, and well-represented before they ever start house-hunting.

So if you have a REALTOR® you trust and you’re moving to a place they can’t serve directly, lean on their network. Let them find someone compatible—someone whose style matches yours—so you don’t have to start from scratch.

A referral shouldn’t be a random name. It should be a handoff from one professional to another.

Staying Motivated During the Search

Ask what happens when buyers get discouraged.

This topic belongs more fully in the “Looking at Houses” step, but here’s the short version:

Buying a home is not a sprint. It’s a marathon. There will be starts, stops, and moments where you feel like you’ll never find the right place.

A good REALTOR® will:

set a steady pace,
help you recognize and avoid avoidable mistakes,
remind you not to rush or force something that isn’t right, and
keep you grounded when emotions run hot.

When we get into Step 6, you’ll hear one of my core pieces of advice:

“Don’t get in a hurry. When you put the horse before the cart is when you start making mistakes.”

Part of choosing the right agent is choosing someone who keeps you moving without pushing you into bad decisions.

Understand How Representation Works (and Why It Matters in Texas)

In Texas, every license holder must provide the IABS — Information About Brokerage Services notice. It explains:

who the brokerage represents,
what duties are owed to clients,
what duties are owed to customers, and
how representation works when one brokerage is involved on both sides of a transaction.

It isn’t a contract—it’s a disclosure so you understand your rights before you get too far into the process.
Intermediary Representation: When One Brokerage Is on Both Sides

Texas allows a brokerage to represent both the buyer and the seller in the same transaction. This is called intermediary representation.

Here’s the key point:

A brokerage may represent both parties, but one single agent is not the ideal choice to represent both at the same time.

To protect everyone’s interests, the broker can (and in most real-world situations, should) appoint different agents:

one agent to represent the seller, and
one agent to represent the buyer.

These are called appointed agents, and each has a legal duty to advocate fully for their respective client. That way:

you have someone negotiating for you,
the seller has someone negotiating for them, and
confidential information stays with the appropriate party.

In larger brokerages, this setup is common and usually works smoothly because agents typically do not know confidential details about the other party beyond what is in the MLS.

If you’re in a state that allows one agent to work both sides under Dual Agency, or you’re in Texas under an Intermediary situation, you should always insist on different representation on both sides.

The Simple Rule

The seller’s agent should NEVER be the person you turn to as your buyer’s agent—unless you are experienced enough to advocate entirely for yourself.

If you expect someone to negotiate the price aggressively, push for repairs, protect your inspection rights, or structure the deal in a way that favors you, you need your own representation—whether that agent works inside the same brokerage or with a different one.

Brokerages can remain neutral. Appointed agents can advocate strongly. But one single agent cannot fully advocate for both sides at once. When you’re thinking about how to choose a Realtor, make sure you understand who they work for—and what that means for you.

Be Aware of Incentives and Conflicts

Most REALTORS® are paid as a percentage of the sales price. That means the higher the home price, the higher the commission. Good agents know this incentive exists and deliberately work against it on your behalf.

During the COVID run-up, many homes sold well above their actual appraised values. I had clients who wanted to offer far over the market-supported price on a home. I built a CMA (Comparative Market Analysis) and showed them exactly how far above value they were going. They understood that—and still chose to make the offer.

Because we were honest about value up front, we had negotiating room when the inspection report came back. The sellers, thrilled with the offer, agreed to fix every issue. As of last month, that home is now worth more than my clients paid.

That is the kind of outcome you get when you choose a REALTOR® who tells you the truth, not just what gets the deal closed fastest.

A Good Agent Knows When NOT to Sell

Most people assume a REALTOR® will always push them toward a transaction. Sometimes, the best advice is: “Stay put.”

I once met with homeowners who thought they needed to sell their house to cover new financial obligations after a family tragedy. On paper, selling looked like the obvious solution. When we walked through the numbers together, it became clear that selling would actually make things worse. Their mortgage payment was significantly lower than what they would pay to rent even a modest apartment.

A lot of agents would have seen a potential paycheck and encouraged the sale.

I laid out the reasons they should not sell—and they kept their home.

When you think about how to choose a Realtor, remember: you want someone who is willing to talk you out of a sale or purchase if it’s not in your long-term best interest. In industry lingo, you’re paying for their advice and opinions. You don’t have to like them. You don’t have to follow them. But you should listen to them and understand why your agent is telling you these things.

How Buyer’s Agents Are Paid Today

Traditionally, sellers often covered the compensation for both the listing broker and the buyer’s broker. After the 2024–2025 NAR settlement, that model became more flexible—not eliminated, but no longer assumed.

Here’s what you need to understand as a buyer:

Sellers may still offer compensation to buyer’s agents. In many markets, including Abilene, that’s still common.
However, they are not required to.
Commission rates are 100% negotiable. There is no “standard” percentage, and the higher the property price, the more likely the commission percentage is reduced.
All commissions are paid to brokerages, not directly to agents. Agents are paid by their brokers.

Fees, Disclosures, and “No Surprises” Compensation

Before you commit to representation, it is reasonable—and appropriate—to ask whether there are any fees beyond the agreed compensation structure.

If administrative fees, transaction fees, marketing fees, or other add-ons exist, they should be disclosed clearly and discussed before you sign a representation agreement or write an offer. Buying a home involves enough complexity without unexpected charges appearing at the finish line.

Clarity here protects everyone. When compensation is fully understood up front, the focus stays where it belongs: finding the right home, negotiating effectively, and getting to closing without friction or mistrust.

FSBOs (For Sale By Owner)

For Sale By Owner properties are often listed that way because the seller does not want to pay commission to either side. That can affect:

whether they will compensate your buyer’s broker at all,
how your offer must be structured to address your agent’s fee,
whether the seller understands their disclosure and paperwork obligations, and
how much extra work your agent ends up doing to keep the transaction on track.

A FSBO is not automatically a bad opportunity, but you should be prepared for the possibility that compensation will need to be addressed explicitly. In many cases, this can be structured as part of your offer—but your agent and lender must ensure it complies with loan guidelines and does not create downstream problems.

What a Good Realtor Will Do About Compensation

When you’re deciding how to choose a Realtor, pay attention to how transparent they are about money. A good REALTOR® will:

explain clearly how they are compensated on each property,
show you all suitable homes—not just the ones that pay more,
help structure offers that legally incorporate buyer-broker compensation when needed, and
make sure you understand the financial implications before you sign anything.

The goal is simple: your agent should be paid in a way that makes sense for you—not in a way that quietly shapes what homes you’re allowed to see or surprises you at the end.

Bringing It All Together Before Step 6

Choosing a lender and understanding underwriting put numbers and rules around what you can buy. Learning how to choose a Realtor puts a professional in your corner who can work inside those numbers and rules to help you find the right home.

Your lender and your REALTOR® should be communicating, comparing notes, and aligning around your best interests—not just trying to get a deal done. When that team is in place, loan types and home search strategies make a lot more sense.

In the next part of this series, we’ll dive into different loan programs and how they affect what you can buy. After that, we’ll finally get to the part most people think is Step 1: actually looking at houses.

If you have questions about how to choose a Realtor, or you want to talk through your own situation before you start shopping, I’m always happy to help.

About Me — Doug Berry, MBA, REALTOR®

The Bow Tie Agent

I’m a REALTOR® with Better Homes & Gardens Senter, REALTORS® who focuses on helping buyers understand the real-world side of homeownership — from lending and budgeting to navigating underwriting without surprises. With an MBA (Marketing concentration) and experience as a lender with USDA Rural Development’s mortgage programs, I approach the process the same way I do with clients: clearly, calmly, and without sales pressure.

If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:

📧 Doug@senterrealtors.com

📞 325-338-9734

🌐 www.dougberry.realtor

Home Buying Steps • December 12, 2025

Fixing Underwriting Issues — Home Buying Step 4

by Doug Berry

Bow tie keychain on an underwriting review document with pen and calculator, illustrating fixing underwriting issues during the mortgage process.

Fixing Underwriting Issues — Home Buying Step 4

Step 4 of my practical, experience-based Home Buying Series covers something most buyers eventually face: fixing underwriting issues uncovered by the lender or underwriter. In the real world, the first response isn’t always “yes.” More often, it’s “not yet.”

If you missed the earlier steps, find them here: Step 1–Know your Credit, Step 2 Build a Sustainable Budget, Step 3 Find a Lender

Most home-buying guides skip this part, but it’s where a huge amount of clarity—and frustration—happens. The goal of this step is to help you understand why issues come up, what they mean, and how to address them without derailing your goal of buying a home.

Fixing Underwriting Issues When “Not Yet” Is Not “No”

If your lender or underwriter asks for more information, then that is not a denial. It means they need clarification, documentation, or a better understanding of something that doesn’t make sense on paper. If you cannot provide a requested document, that may slow you down, but it is still something you talk through with your loan officer—not a reason to panic.

This is also where the lender you chose in Step 3 matters. A good lender explains the issues, shows you what needs to be fixed, and gives you a roadmap forward. A poor one simply says “no.”

Underwriting Looks at the Story Behind the Numbers

On paper, your file is just numbers and dates; however, the context behind them matters. Underwriters are trying to decide whether those numbers tell a story that makes sense.

One coworker at USDA worked with an applicant who had a long job history—too long. On paper, it looked like he jumped from job to job. But when they talked, a clearer picture emerged; in fact, the moves made perfect sense: he was a young auto mechanic with a growing family, moving shops to get raises and better insurance. When the right job came along, he stayed. Former employers confirmed he was rehirable.

What looked risky on paper made perfect sense once someone understood the context. That is exactly what underwriters are looking for when they ask questions.

Give the Lender Exactly What They Ask For

This step is essential for fixing underwriting issues, because missing items slow the processing of your file more than anything else. If the lender needs four weeks of pay stubs, they need four weeks—not three-and-a-half. If your employer gives you a hard time about printing them, explain how important it is and keep pushing until you get them.

Underwriters never ask for documentation out of curiosity; instead, they ask because something must be verified. Missing or incomplete paperwork will slow the process down or stop it entirely.

Income: Is It Stable and Dependable?

Underwriters evaluate income based on two questions:

Is this income likely to continue?
Is it reasonably predictable?

Seasonal work, second jobs, and variable hours don’t automatically disqualify you—but they do require explanation. For example, I worked with a high school teacher who spent summers working for the highway department so he would have Social Security in addition to Teacher Retirement. Logical and responsible, but without explanation, it would have appeared inconsistent. Clear explanations help underwriters evaluate stability and are often a key part of fixing underwriting issues early.

Assets: Showing What You Own and What You Owe

Assets are another common stumbling block. Many people focus only on what they owe and forget to list what they own. Lenders separate assets and liabilities on purpose.

If your car is worth $10,000 and you owe $7,000, the car is still a $10,000 asset. The loan is a separate liability. If you owe more than the car is worth, then the lender typically counts the asset portion as having a value of $0—not negative value—because negative equity cannot improve your approval picture. The goal is simply to present a complete and accurate list of what you own.

Tax Returns and IRS Transcripts

Tax returns cause trouble for many buyers. People file and forget, and when underwriting asks for W-2s, 1099s, or older returns, they don’t have copies. If that happens, you can download:

Return transcripts
Wage and income transcripts

from IRS.gov. Lenders need both the return and the documents used to prepare it. While at USDA, I helped many applicants retrieve what they needed—often sending screenshots showing exactly where to click and what to download.

Bank Statements and “Proving” Your Money

Bank statements are another common challenge. If you receive Social Security on a debit card, that card still has statements—and the lender needs them. The same goes for PayPal, CashApp, Venmo, and similar services. Underwriters must be able to track:

where your money comes from, and
how it flows over time.

If you cannot document the source of income or deposits, the lender cannot count them—even if they’re real. Fixing underwriting issues is more about providing documentation than anything else.

When Credit Is the Issue

Sometimes the barrier isn’t documentation—it’s credit. Many programs have minimum score requirements, but your score also affects:

interest rates,
insurance premiums, and
credit card rates.

Your payment history on debts that appear in your Debt-to-Income Ratio (DTI—discussed in Step 3)—mortgage or rent, auto loans, student loans, and credit cards—affects your credit score the most. Being late paying back a friend is not the same as being late on a car note unless your friend reports to a credit bureau. Not likely.

Other major credit factors include:

Credit utilization: high balances hurt your score.
Mix of accounts: lenders like to see both installment loans (such as student loans, auto loans, or a mortgage) and revolving credit (usually credit cards).
No credit history: operating entirely on cash can make it difficult to qualify for a loan.

Fixing Underwriting Issues Should Be Fast, Fixing Credit Takes Time

If credit is the reason your application stalled, then improvement takes time. There is no quick fix. There are no shortcuts. You should:

dispute only incorrect items on your credit reports,
stay current on all debts that report to credit,
avoid opening new lines of credit, and
avoid Buy Now Pay Later services.

Changing jobs or opening new credit lines during the loan process can stop your application entirely. And while credit repair companies often promise miracles, they cannot remove accurate information. At USDA, I saw applicants dispute correct items constantly—it never helped, and it makes lenders doubt your credibility.

Owning negative credit means acknowledging it honestly and explaining what caused it. For many people, especially during the COVID-19 pandemic, job loss or reduced hours made it nearly impossible to meet obligations. Context matters—as long as you provide it.

Not all borrowers fit into neat pigeon-holes. Not having traditional credit is not always a no. USDA’s Direct Loan program can consider non-traditional credit sources, but they’re still trying to develop a picture of your willingness and ability to repay your obligations.

All an underwriter at any lender is doing is trying to understand that willingness and ability to repay your debt. And while that phrase “willingness and ability” sounds awkward, some people can pay their debts, but choose not to. Others want to, but are unable to. Both pieces have to be in place before a lender will believe that you’ll repay the mortgage you get from them.

When the Answer Really Is “Not Right Now”

If you are living paycheck to paycheck, missing payments, and fielding calls from creditors, you may not be ready to buy a home yet. That is not failure. It is information.

This is where Step 3 becomes important. A real, honest budget will tell you whether homeownership is sustainable right now. If the numbers do not work, something has to change—income, spending, debt, or timing. Many buyers still want to push forward even when the budget shows they’re not ready. I understand that urge, but underwriting protects you from stepping into a situation you cannot maintain.

Your goal is not just to buy a home—it is to keep it.

If your budget shows you are not ready for homeownership right now, taking time to prepare is far better than forcing a loan that becomes impossible to maintain. Some loan programs, especially government-backed ones, carry long-term repayment obligations even if you walk away from the property. Understanding this early protects you later.

Next, we move on to Step 5, where you learn how to hire a Realtor.

About Me — Doug Berry, MBA, REALTOR®

The Bow Tie Agent

If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:

📧 Doug@senterrealtors.com

📞 325-338-9734

🌐 www.dougberry.realtor

Home Buying Steps • December 10, 2025

How to Choose a Mortgage Lender — Home Buying Step 3

by Doug Berry

A paisley bow-tie keychain and pen resting on a mortgage loan application, symbolizing how to choose a mortgage lender during the home buying process.

How to Choose a Mortgage Lender — Home Buying Step 3

How to Apply for a Mortgage Without Accidentally Sabotaging Yourself

Before anything else, you must understand how to choose a mortgage lender who will guide you through the process instead of just selling you a product.

Most buyers begin their home search online, and that is where the ads from lenders appear. Many big-name and online lenders are reputable and can close loans, but they all share one limitation: they are not local. A local lender is easier to reach, easier to hold accountable, and easier to sit down with when something goes wrong.

When you begin the buying process, one of the most important early decisions is to understand how to choose a mortgage lender who will guide you instead of pushing products.

If you haven’t already reviewed your credit report or created a realistic home buying budget, start with Step 1: Know Your Credit and Step 2: Build a Budget That Tells the Truth. These two steps prepare you for the conversations you’ll have with a lender.

Rate shopping still matters. Over a 30-year mortgage, a quarter percent difference in interest adds up. But the relationship matters just as much as the rate. Your lender will examine your bank statements, tax returns, income history, spending habits, and assets. They learn more about your financial life than almost anyone else, which is why trust and communication matter so much.

Several years ago, I worked with a couple who chose an online lender. Everything went smoothly until three days before closing, during the week after Christmas. Their loan officer went on vacation. The person covering the file did not understand it and asked for nearly every document to be resubmitted. With a local lender, the replacement likely would have been in the next office and the problem could have been solved quickly. Distance and call centers make everything harder when something unexpected happens.

How to Choose a Mortgage Lender

A good lender does more than quote rates. They should walk you through how your income, credit history, employment, deposits, and existing debts will be evaluated. They should also be upfront about which loan programs you may qualify for and which ones would be a stretch. When you feel comfortable asking questions—and getting clear, direct answers—you are far less likely to be surprised later in underwriting. Choosing the right lender sets the foundation for the entire loan application that follows.

How to Complete the Loan Application When You Choose a Mortgage Lender

Nearly all lenders use the Uniform Residential Loan Application, also known as Form 1003. How you complete this form determines how many questions the lender has to ask later. Before you choose a mortgage lender, it helps to understand how the loan application is evaluated and why small errors can slow approval.

Fill Out Every Section

If a section does not apply to you, write “N/A.” Leaving blanks usually leads to follow-up questions and additional document requests. Clear answers at the start mean fewer headaches later.

Tax Returns: How Many Years Do Lenders Need?

When I worked at USDA Rural Development, we requested two years of tax returns as a standard rule. If you apply early in the year and have not yet filed the current return, the lender uses the previous two years and then requests the new return once filed. Most lenders follow this pattern—they want a consistent income history, not a single good or bad year taken out of context.

Provide Only What Is Requested

One of the most common problems I saw was borrowers sending far more documentation than requested. If we asked for two months of bank statements, some people sent six or twelve. If we asked for two years of tax returns, some sent ten. I also routinely received hundreds of pages of self-pulled credit reports.

Lenders cannot use consumer credit reports. They must use their own official Tri-Merge Credit Report (TMCR). But once you send a document—whether they asked for it or not—they must review it. That review sometimes raises new questions, slows the file, and occasionally derails approval. The same is true for extra bank statements, extra pay stubs, and extra letters of explanation.

This is another reason to choose a mortgage lender who explains what they need and why, instead of overwhelming you with unnecessary requests. The safest approach is simple: give the lender exactly what they ask for, no more and no less.

Why Lenders Examine Deposits and Transfers

Lenders must determine where your money comes from and whether it is stable and allowable for mortgage approval. That includes both assets and income.

USDA Rules for Deposits

Under USDA’s current guidance, any cash deposit or unexplained deposit over $100 must be documented and explained for loan qualification purposes. Once such deposits appear on your bank statement, the lender must obtain an explanation. If funds cannot be documented, they cannot be counted as income, reserves, or down payment contributions.

This is why it is important to avoid random, undocumented deposits when preparing to apply for a mortgage.

If You Run a Small Business or Side Gig

If you earn money through a small business or side gig and receive income via CashApp, Venmo, PayPal, Zelle, or cash deposits, assume the lender will ask for more than a bank statement. You may need to provide:

Business profit-and-loss statements
Business tax returns, if applicable
Evidence that funds are business income and not gifts
Documentation showing how long the income has been received

Keep separate accounts for business and personal funds. Mixed accounts make it harder for lenders to determine what counts as stable income. If income cannot be documented clearly, lenders are not allowed to count it.

How Student Loans Affect Your Mortgage Approval

Student loans are one of the most misunderstood pieces of the debt-to-income puzzle. As discussed in Step 2, your debt-to-income ratio (DTI) is a key number that determines how much house you can afford. Even if loans are deferred or in forbearance, they generally must be counted. You don’t need to memorize these rules—this section exists to show why clear explanations from your lender matter.

USDA and FHA Loans

For USDA and FHA loans, lenders use:

The actual payment shown on the credit report or billing statement, or
0.5% of the outstanding balance when no payment is listed or the listed payment is $0.

This means student loans count toward your DTI even when you are not currently paying on them.

VA Loans

For VA loans, lenders generally use the actual fully amortizing payment. If no payment information exists or the loan is in certain kinds of deferment, lenders calculate a payment equal to 5% of the outstanding balance divided by 12.

Conventional Loans

Conventional lenders may use the actual documented payment or, if none is available, a payment equal to 1% of the loan balance. Some lenders may allow lower documented payments from approved repayment plans.

The takeaway is simple: student loans always matter, and the rules vary by program. Understanding these differences is easier when you choose a mortgage lender who can explain them.

Rate Shopping Without Derailing Your File

To issue a pre-approval, your lender must pull a hard inquiry on your credit report. Multiple mortgage inquiries within a short period typically count as a single inquiry, so smart rate shopping is expected and acceptable.

However, other kinds of new credit activity can harm your application, especially during the mortgage process:

New credit cards
Auto loans
Personal loans
Furniture and store financing
Buy Now, Pay Later (BNPL) plans

Buy Now, Pay Later (BNPL) and Your Mortgage

BNPL can affect a mortgage in two ways. First, many BNPL accounts now appear as tradelines, increasing your monthly obligations and affecting your DTI. Second, missed BNPL payments can trigger hard hits and negative marks that delay approval.

Even when BNPL payments do not appear as tradelines, underwriters still see recurring app payments on bank statements and may classify them as ongoing obligations.

If you are preparing to apply for a mortgage, the safest option is to keep your financial life quiet and predictable—no new credit and no BNPL.

Your Lender vs. Your Realtor: Privacy and Fiduciary Duty

One important distinction often surprises buyers: your lender knows more about you than your Realtor ever will. They see your bank statements, spending patterns, transfers, debts, and deposits in detail. If you spend $50 a week at a liquor store—or anywhere else—they will see it.

Your Realtor does not have access to this information unless you choose to share it. And even when you tell us things, we are bound by a fiduciary duty to protect your confidentiality.

What Is Fiduciary Duty?

Fiduciary duty means your Realtor must act in your best interest at all times. In Texas, this includes:

Loyalty — placing your interests above all others
Confidentiality — not revealing private information without your permission
Disclosure — telling you anything we know that could affect your decisions
Obedience — following lawful instructions from you
Reasonable care — providing competent guidance
Accounting — safeguarding your funds and documents

This means you can speak candidly with your Realtor about concerns, obstacles, or potential problems without fear that the information will be used against you. Your lender may need to question your documentation, but your Realtor’s role is to guide and protect you.

Why You Must Choose a Mortgage Lender Before Comparing Loan Types

Loan programs—USDA, FHA, VA, and conventional—each have unique rules, costs, and property requirements. Your loan type influences how much money you need to bring to closing, what properties qualify, and how forgiving underwriting will be.

Most mortgage types—FHA, VA, USDA Guaranteed, and conventional—can be shopped among many approved lenders. But a few programs work differently. For example, USDA Direct is not offered through banks or mortgage companies at all; you apply directly with USDA Rural Development. Some other specialty or nonprofit loan programs also use a single designated lender or a very limited list of approved lenders. For nearly all buyers, though, choosing the right lender comes before deciding which loan program fits best.

Before jumping into those differences, it makes sense to choose a mortgage lender who explains your options clearly. But first, there is one more optional step for buyers whose first answer is “no.”

Step 4A: “Your Lender Said No — Now What?”

Not everyone qualifies on the first try. Step 4A explains what to do next, how to avoid making the situation worse, and how to work toward a future approval.

For earlier parts of this series, see Step 1: Know Your Credit and Step 2: Build a Budget That Tells the Truth.

About Me — Doug Berry, MBA, REALTOR®

The Bow Tie Agent

If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:

📧 Doug@senterrealtors.com

📞 325-338-9734

🌐 www.dougberry.realtor

Home Buying Steps • December 8, 2025

Home Buying Budget – Step 2 of Doug Berry’s Buying Series

by Doug Berry

Flat-lay photo of a budget worksheet, calculator, pen, and an orange bow tie keychain on a wooden desk, symbolizing real-world home-buying budgeting.

Home Buying Budget – Step 2 of Doug Berry’s Buying Series

A real home buying budget is the foundation of every successful purchase.

Home Buying Series by Doug Berry, MBA — Realtor®

Step 2 of the Home Buying Series is all about building a real home buying budget—one that matches the way lenders think and the way you actually live.

Budgeting isn’t glamorous. But knowing where your money comes from and where it goes is one of the most important parts of the home-buying process. If you’re blowing 20% of your income on things you could live without, that’s money that could be going toward a house payment. And if a car note is eating most of your monthly margin, you’re eventually forced into a choice: a nicer vehicle or a home — because in a lot of cases, you can’t comfortably have both.

Building a home buying budget early helps prevent surprises once you begin talking to lenders.

This step isn’t about judgment. It’s about clarity.
And clarity is what lenders base decisions on.

If you missed Step 1 — checking and understanding your credit — you can read it here.

Start With the Basics: Track Where Your Money Actually Goes

There’s no single “right” way to build a budget. You can:

gather your bills and paystubs and write everything down,
input it into a spreadsheet (like the worksheet that accompanies this step), or
use budgeting apps that surface forgotten or duplicate charges.

Case in point: part of my phone bill was still charging me for a Wi-Fi hotspot in my wife’s car… which had been totaled. Without digging into the details, I would’ve kept paying it every month.

A quick warning

After a free trial ends, step back and ask whether the budgeting app is actually providing lasting value.
Canceling $20/month in subscriptions just to replace them with a $20/month budgeting app you stop using doesn’t help.

What You’re Actually Building: A Clear Home Buying Budget and Your DTI

What all this tracking ultimately does is help you understand your DTI — debt-to-income ratio.

That’s exactly what the worksheet calculates for you.

Preview of the Home Buying Reality-Check Budget Worksheet showing editable yellow budget fields, debt-to-income ratio calculation, cashflow after buying, and the color-coded affordability verdict.

A real-world budget and DTI calculator—enter your numbers in the yellow cells to see whether a home fits your actual finances.

Download the Home Buying Reality-Check Worksheet

Use this fill-in-the-blank Excel worksheet to calculate your
real debt-to-income ratio and see whether a mortgage payment fits your actual budget.

Download Budget Worksheet (Excel)

Tip: The file opens in read-only mode. Click Download to save your own copy,
then enter your numbers in the yellow cells only — the worksheet does the rest.

DTI isn’t an opinion; it’s a lender’s mathematical snapshot of:

how much you earn, and
how much of that income is already locked into contractual payments.

And here’s the key distinction most buyers don’t realize:

**What lenders count as debt**

Rent
Credit card minimums
Personal loans
Student loans
Car payments

**What lenders do not count as debt**

Groceries
Childcare
Utility bills
Gas
Phone bills
Streaming Services

This is why your real-life budget and a lender’s budget often look nothing alike.

Your lender might say, “Yes, this works on paper,” while your bank account is saying, “Absolutely not.”

Note on Student Loans: For budgeting purposes, include your student loan payment as either your current required payment or 0.5% of your outstanding balance—whichever is higher. Many lenders must use a calculated payment for underwriting purposes even when your current payment is $0, and student loans that aren’t in repayment still count in your Debt-to-Income Ratio. Step 3 will go into how lenders apply this in more detail.

Where Lenders Get Nervous (and Where I Do)

Most lenders are comfortable when your back-end DTI (all debts + future house payment + taxes + insurance) stays in the high 30% range. Once you cross into the 40s, the bank starts getting nervous—and understandably so.

From experience, including my years at USDA:

38% is the point where borrowers can usually live their lives and afford the house.
41% was USDA’s maximum, and even then I was cautious—because the margin for error is very thin.

When your DTI gets too high, every unexpected bill hits harder and faster than people expect.

The Real Question You Must Answer Before a Lender Ever Sees Your Paperwork

Can I actually afford a home — comfortably?

A bank cares if you can make the payment.

You have to care whether you can keep making it without sacrificing stability.

Every home-search website will show you a mortgage estimate.

What they almost never show you is the true cost of owning a house:

Property taxes
Homeowners insurance
Maintenance and repairs
Higher utilities compared to an apartment or duplex
HOA dues

Your mortgage payment might be lower than your rent, but the total monthly cost of ownership rarely is.

Rising costs matter

At USDA, one of the biggest pitfalls I saw was rising taxes and insurance premiums.

If your loan has escrow (almost all do), increases become escrow shortages—and that often means:

a lump-sum payment, or
a higher monthly mortgage payment.

Both hit hard when your budget is already stretched.

Savings: The Uncomfortable Topic That Keeps People in Their Homes

Texans understand the concept of a rainy-day fund.
Homeowners need one too.

Something will go wrong:

the AC fails,
the water heater dies,
a roof leaks,
someone loses a job or takes a pay cut.

The standard “3–6 months of expenses” rule is solid—but difficult for many people.

The point isn’t perfection; it’s momentum.

Even $20–$50 per paycheck adds up.

That small cushion is the difference between a bad month and financial disaster.

(Note: the worksheet reflects this by showing that one good month does not equal long-term stability.)

On the Other End: Too Much Equity and Not Enough Cash

This is something people don’t talk about enough:

You can absolutely put too much into the house.

Yes, rolling some closing costs into the loan is normal.
Yes, putting more down saves interest over time.

But draining every account to buy a home leaves you house-rich and cash-poor, and that is far more dangerous than a slightly higher payment.

We’ll talk more about tools like HELOCs and reverse mortgages later—they can help in the right circumstances, but they are powerful enough (and risky enough) to deserve their own step.

A Quick Note on How Your Money Is Parked

After seeing countless bank statements, I can say with confidence:

Most people earn far less interest than they should.

For example:

One couple I worked with kept nearly $20,000 in an account earning 0.25%.
They could have been earning 4.5%.

That’s:

$50 a year vs.
$900 a year.

They were leaving $850 on the table annually—money that could have funded savings, repairs, or emergencies.

Big banks often keep customers in low-yield accounts.

A smart budget includes making your money work for you, not just tracking where it goes.

The Tradeoffs: What You Choose Determines What You Can Buy

Whether people admit it or not, homeownership comes with tradeoffs:

A new home or a new car.
Eating out often or building savings.
Flexibility or long-term roots.

Homes can be incredible tools for stability and wealth-building.

But they’re not the right choice for every season of life.

This step helps you identify which season you’re in.

Why Step 2 Matters

A clear home buying budget gives you confidence and prevents most first-time buyer mistakes. If you:

understand your credit (Step 1),
know where your money is going, and
have a realistic picture of your DTI,

then you will walk into Step 3 — choosing a lender with confidence instead of anxiety.

This is the moment where you stop guessing and start steering.

And with the included worksheet, you can see your numbers laid out the same way a lender will–taking the time to build a realistic home buying budget now makes the next steps with your lender far easier and far less stressful.

Next: Step 3 — Choose a Lender Who Explains, Not Sells

Once you know what you can comfortably afford, the next move is finding a lender who will explain your options—not pressure you, confuse you, or hide the “why” behind the numbers.

About Me — Doug Berry, MBA, REALTOR®

The Bow Tie Agent

If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:

📧 Doug@senterrealtors.com

📞 325-338-9734

🌐 www.dougberry.realtor

Home Buying Steps • December 5, 2025

Step 1: Know Your Credit — Home Buying Series

by Doug Berry

Credit report document on a wooden desk with charts and graphs, a pen, and a bow-tie keychain with house keys placed on top.

Step 1: Know Your Credit — Home Buying Series

Welcome to Step 1 of my practical, experience-based Home Buying Series. I’ve spent years on both sides of the table — helping buyers qualify for USDA mortgages and guiding families through the real-world process of purchasing a home in today’s market. Most online guides are generic and skip the parts buyers actually struggle with. This series is different; it’s designed to walk you through every step the way I do with clients, with clarity, honesty, and no sales pressure. Let’s dig into what you need to know about home buying credit!

Understanding Your Home Buying Credit

Buying a home—whether it is your first or fiftieth—can be a long, drawn-out game where you don’t know what the rules are and you aren’t sure if you are holding the right pieces. It doesn’t have to be. Today, we begin with the first and most important step: understanding your home buying credit before the lender does.

Start by Checking Your Home Buying Credit

The easiest way to check your credit is at www.annualcreditreport.com. What you’re looking for are any negative items that show up in your reports or anything that’s just plain wrong.

AnnualCreditReport.com is the federally authorized site where consumers can review their credit reports from all three bureaus at no cost.

Some years ago, I had an incorrect address show up on my report. It was a simple matter of filling out a form, and it was removed… eventually.

It’s important to pull all three bureaus — Equifax, TransUnion, and Experian — because not all lenders report to all three. I once had a client who thought his credit was excellent because his bank showed him a great score when he logged in. When he pulled all three reports, the picture wasn’t so rosy.

Having derogatory items doesn’t always mean “no.” A one-time issue with a reasonable explanation may not sink your loan — but surprises will.

The other reason to look at your reports is to know what’s in them when you sit down with a lender. H

A quick clarification that helps a lot of people: your credit report is not the same thing as your credit score. The report shows the raw data — who has loaned you money, your payment history, where you’ve lived, and sometimes even past employers. Your score is all that information boiled down into a single number. And each bureau calculates it differently, which is why you’ll never see three identical scores.

What isn’t on your credit report are things like your income, your savings, or how much money you keep in your checking account — lenders have to verify those separately.

What to Look For in Your Credit Report

So what should you actually be looking for on your reports?

Accounts you don’t recognize
Late payments that are wrong
Collections that aren’t yours
Addresses that aren’t yours
Balances that don’t match reality
Duplicate debts
Accounts that should have been closed

How Long It Takes to Fix Errors

How long does it take to correct errors? If it’s something simple — like a wrong address — it might take a week or two. If you’re dealing with collections (especially if they’re questionable), expect months, not weeks.

Whoever reported a collection has no incentive to move quickly. They usually won’t act without proof, and if you paid something in cash years ago and lost the receipt, you may never fully solve it. It should drop off after 7 years, but I’ve seen instances where the debt was sold to a collection agency, the borrower made a payment and “renewed” the debt and it hung on far past the 7-year mark.

Also, be careful with anyone who promises to “fix your credit” for a fee. All they’re really doing is submitting documentation — something you can do yourself. If you don’t have proof, paying someone else won’t magically create it.

Each bureau has educational tools to help you understand your credit. Experian even offers a “boost” feature where you connect your bank account so recurring bills can help your score. Just know this only affects your Experian score.

When I worked at USDA, we used the mid-score — the middle of your three scores, not the highest or the lowest. If one score is way lower than the other two, you need to figure out what’s on that report that isn’t showing elsewhere.

Also note that each bureau has slightly different data because lenders choose which bureaus they report to. That’s why one report may look clean, and another may show something you forgot about.

Finally — and this is important — do not open any new accounts right now. No credit cards. No car loans. Nothing. If you’re unsure whether something counts as ‘new credit,’ pause and ask before proceeding.

Every hard inquiry impacts your score. Some places will tell you they can “check you without pulling credit,” which may be true for a soft pull — but once you apply for a loan or credit card, a hard inquiry is coming. And that does affect your score.

Soft Pull vs. Hard Pull: What’s the Difference?

What’s the difference between a soft pull and a hard pull?

A soft pull is a peek at your credit.

It doesn’t affect your score, and you can’t be denied anything based on it.
Examples include:

checking your own score
Experian Boost
pre-qualified credit card offers
“see if you’re eligible” ads from lenders

Checking your own credit never hurts your score. And at this stage, you don’t need to know your exact numerical score — you just need to know what’s on each report. In short, you do not need to pay each bureau for your numerical score. Most banks and other deposit institutions (like credit unions) now show you one of the three scores for free, so you’ll have a rough idea of what the info on that particular report looks like as a number.

Remember that the score you see on apps like Credit Karma isn’t always using the same scoring model that your lender will use.

A hard pull is the official inquiry lenders use to approve you for credit.

It does affect your score — usually by 3–8 points — and it stays on your report for about two years.

Here are the types of applications that trigger a hard pull:

applying for a mortgage
applying for a car loan
applying for a credit card

Buy-Now-Pay-Later (BNPL) services, such as Affirm, Klarna, and Afterpay, often show up on your credit history. At USDA, we treated them as short-term loans. You do not want to use BNPL right now because those small payments can affect your debt-to-income ratio later and raise questions during underwriting.

The important part is this:

You cannot get a mortgage without a hard pull.

So don’t stress about protecting your credit from the pull that actually matters — focus on avoiding unnecessary ones beforehand. Also, multiple mortgage pulls within a short period (usually 14–45 days, depending on the scoring model) generally count as one inquiry — so smart rate-shopping won’t punish you. At this stage, you’re simply gathering information so you know where your home buying credit stands.

Pre-Qualified vs. Pre-Approved

Because lenders love marketing terms, you’ll also see pre-qualified and pre-approved, and they are not the same thing.

Pre-qualified usually means a lender looked at a soft pull or simply took your word for your income and debts. It’s a snapshot — helpful for conversation, not for buying a home.
Pre-approved requires a hard pull, documentation, and actual underwriting review. This is what sellers and real estate agents take seriously because it means someone has verified your information instead of guessing.

You can buy a house with a pre-approval.

You cannot buy one with a pre-qualification.

And you cannot get a pre-approval without that hard pull.

Why Step 1 Matters Before You Meet a Lender

Step 1 is all about clarity. When you know what’s really on your credit report — the good, the bad, and the ugly or unexpected — you walk into the rest of the homebuying process with confidence instead of surprises. Reviewing all three reports gives you the full picture of your home buying credit before lenders run official checks. In Step 2 of this series, we’ll take that clarity and build a real-world budget that lenders understand… and that you can actually live with.

About Me — Doug Berry, MBA, REALTOR®

The Bow Tie Agent

If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:

📧 Doug@senterrealtors.com

📞 325-338-9734

🌐 www.dougberry.realtor