Is It The Perfect Time For You To Purchase A Texas House? Pt 2

Ideas To Know If You’re Now Able To Buy A Home In Texas

Part 2

4. Your Credit Score Is More Than 500

If you have a credit score that’s not lower than 500, it’s another indication telling you that you’re financially ready to get your own home.

Aside from having enough money in your bank account and a good DTI, lenders largely take into consideration one’s credit score in terms of deciding whether a person is approved for a mortgage loan or not. The exact score needed to get approved greatly depends on the type of house and loan that you’re applying for. Generally speaking, having a credit score of 620 will get your conventional pre-approved immediately. However, there are exceptions for first-time buyers that they may get an FHA loan and get approved even with a credit score of 500.

5. The Market Is Leaning Towards Your Favor

How will you know? If the mortgage rates are showing a decline, then it’s a great indication that it’s the right time to make a home purchase.

After taking into consideration your financial capacity and stability, another important factor to look into is the market condition. Don’t forget to check the market’s interest rates. If you’ve noticed that there’s a decline in the trend, then it’s a good sign for you because it simply means that you’ll have to pay less when you apply for a house mortgage.

Another factor to look into is the home’s area – does it fall under the seller’s, or the buyer’s market? Remember, you want to purchase a house that’s within the buyer’s market.

6. You’re Ready To Set Some Roots

According to some studies, it’s worth buying a home if you intend to stay in that house for at least five years. Recent research has found out that it takes at least 4 years for homeowners to breakeven on the cost of the house – and an additional year to consider the home as a smart investment.

Buying a home is for those people who are decided that they wanted to live in that city and state for a minimum of five years. If you have a soaring career and if you’re still thinking of moving to another area, then it might not be the right time to make a house purchase.

7. You’re Not Taking Care Of Other Larger Expenses

If you’re paying for big expenses or planning on getting one – then don’t get a house just yet

At this point, it should be clear to you that it requires a lot of thinking, financial stability, and settling down before one can buy a house. It isn’t a simple decision that can be made on a whim. It’s a financial decision that needs to be thought of carefully. If you have other big expenses lined up such as education, wedding, or even having a new baby, now might not be the right time to consider buying a home.

Instead of rushing things, wait for the right time to buy your home. Wait for you to become financially stable, and wait until you’re comfortable on taking larger monthly expenses. Once you’re comfortable taking that additional expense, then you’re ready.

Contact our expert mortgage professionals, call us today, or use our interactive tools that are on offer on our site. We cant wait to meet you. Click here to go to the first article in this series.

Is It The Perfect Time For You To Purchase A Texas House? Pt 1

Ideas To Know If You’re Now Able To Buy A Home In Texas

Part 1

The “perfect” timing in buying a home varies depending on one person to another. Is the time right for you?

In general, there’s no specific answer to questions on when the perfect time is in buying home. It simply means that it all depends on one’s personal decisions, along with several factors to be taken into consideration.

Consider these five indications below in helping you decide whether you should pursue buying a home:

1. You Have A Stable Source Of Income

If you’ve been working for a company for at least two years, it might be a good indication that you’re ready to make a house purchase.

The majority of lenders will want to make sure that you can pay your mortgage and that you can do so, not just within the year, but in the near future as well. One proof for these lenders is that you have a stable source of income, coming from the same employer.

Typically, lenders will ask you to submit your W-2s for the past two years. For those who are self-employed, make sure that you are prepared with your records of tax returns over the past two years. Additionally, lenders may also require you to present any 1099s that you acquired over the course of 2 years.

2. You Have Little To No Debt

Another factor to take into consideration is if have a DTI that is not more than 45%. Another factor that lenders check before they approve your mortgage loan is your DTI, also known as your debt-to-income ratio. Your DTI simply shows your capacity of being able to handle an additional loan, considering all your current debt payments. This is compared alongside the additional income and money you have left after settling the monthly debt payments.

If you have a current DTI that’s more than 45%, you have to work on improving on that ratio before you even consider making a house purchase.

3. You’ve Saved For The Rainy Days

How much is the total cost of the house you’re planning to get? If you have more than 5% of that amount in your savings, it’s a good indication that you’re ready to purchase a home.

Aside from making sure that you have enough money to pay for your mortgage every month, the majority of lenders will also take into consideration how much you currently have in your savings. This amount will go towards the upfront costs such as:

  • Down payment: Most houses require a 20% down payment – although you may find some realtors that may require a little bit less than 20%.
  • Closing costs: These are miscellaneous fees that the home purchaser will need to settle to close the home. There’s no specific amount, and the overall cost will be shouldered both by the seller and buyer. Typically, closing costs range from 2-5% of the overall house price.
  • Reserves: This refers to the total amount of money that will be left to your bank account after the down payment and closing cost deductions. Lenders are most likely to approve your mortgage if you have enough money in your bank, at least 2 months’ worth of your mortgage. There’s no harm in having a larger amount for a buffer, as it increases your chances of getting that mortgage approval.

Contact our expert mortgage professionals, call us today, or use our interactive tools that are on offer on our site. We cant wait to meet you. Click here to go to the next article in this series.

A Perfect Guide To Choose An Adept Mortgage Broker In Texas

Does A Texas Mortgage Broker Really Matter?

Purchase a house in Texas is more straightforward if it is all cash, but having money in cash is easier said than done. Therefore, a mortgage is the next best thing to consider.

As you consider the mortgage, you also must contend with finding a reputable broker. Some are more skilled at facilitating a purchase, and some inadvertently hinder the process. But all the same, a broker is an inevitable element when seeking a mortgage. You want to work with one that can facilitate a smooth transaction as you would want the same thing when it comes to a realtor.

Finding and working with the right mortgage lender or broker is imperative when you want to get value for your money. Pick a professional with considerable experience with the kind of property you want to better the chances of making the process move smoother. With the right broker or lender on your side, you will have access to the information needed and the necessary help for finding the best loan with favorable terms through a process devoid of unnecessary delays.

Getting The Job Done Vs. Doing It Well

Remember that blunders result in wasted time, and time will be money lost. Therefore, as you search for a licensed mortgage broker, keep in mind that having the license does not imply dealing with an experienced broker. Some brokers are armed with the knowledge of navigating the co-operate questionnaires, some have mastered customize solutions that suit each borrower, and others are aptly armed to transact.

We have an experienced team that can, in seconds, discern if a mortgage broker will be a screw-up or push for the best deal. Therefore, we can help you know if you are working with a professional that will cover you with grace and efficiency as you seek financial help in purchasing your dream home.

Different Clients, Diverse Needs

Some mortgage brokers do not rely on an income verification program to provide financing. Conversely, others offer quick turnarounds, in roughly 2-3 days. If a client needs money ASAP or is going to auction, we can recommend mortgage lenders that can help. We know that some people prefer transacting in cash, and we can help them get the financing they need.

Work The Network

The most prudent thing you can do is head your agent’s advice regarding the broker to use. Most agents have worked with different mortgage lenders and brokers; thus are well vast with their performance, professional reputation, and how they relate with clients. Those who are closest to underwriters can move things along faster, and most of them have been in the business for a considerable time, moving up their profession. Therefore, that is the kind of pull you need backing you.

Strive for such connections and build on those relationships that continue long after signing the contract. They are agents with an impeccable professional standing, which can give some leverage as you approach a broker for financial assistance.

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Feel free to contact or call us today!


You’re A Seasonally Employed? Here’s A Guide To Get A Texas Mortgage

Getting A Texas Mortgage When You Have A Seasonal Income

If you are a professional who works part of the year or is seasonally employed, you might have a tough time qualifying for a mortgage. The job can be available depending on the season, such as snow removal, landscaping, or a side hassle. It is a type of employment known as sporadic.

While the nature of your profession might not disqualify you from getting a mortgage, it could make the process somewhat tricky.

The Required Documentation

You must prove to the mortgage lender you have a reliable income even though you have seasonal employment. For VA and FHA loans, you should provide the necessary paperwork that shows you worked for the same employer for at least two years or have been in the same profession for the same period. Moreover, your employer will provide the documents that prove you still be hired in the upcoming season.

However, if you have worked for less than two years, your incomes might not qualify you for the mortgage. Similarly, you might not be eligible even if you have been working for two years, and your employer cannot prove that you will be hired in the season that follows.

What Next If You Cannot Prove This?

If you cannot give evidence that shows you have a reliable income for a period not less than two years, you will not qualify for the mortgage. However, you can re-apply once these changes, and you have the necessary documentation to back it. But if your situation is wanting, you can consider other options even when you opt to wait and reapply.

Provide all your income sources. If you receive Social Security Benefits, have a second or third job, receive unemployment benefits, or some interest income, consider using them to bolster your chances of qualifying for the mortgage.

For instance, you can apply for the mortgage with a close friend, spouse, or family member. You may increase the chances of being eligible for the loan if you add another person, especially one with a good credit score. Keep in mind that lenders will consider both parties’ incomes and credit scores when qualifying the borrower. For better chances of qualifying, consider splitting the homeownership costs and seeking another person’s assistance through the process, which is some of the top benefits of co-owning a home with someone.

Proper documentation can make the difference between being eligible for a mortgage and buying that dream home. But before starting the application process, you should ensure that you sort the W2 forms and have proof of compensation, both covering the last two years. Furthermore, you need your employer to verify you will be hired the next season.

Choose The Texas Mortgage Pros

If you are confident you qualify, begin the process as soon as possible. Texas Mortgage Pros are here to help make things simple for you to have a fast approval. If you are uncertain of your eligibility, get in touch with us today to discover other viable options that you can consider.

Knowing The Right Time For Home Purchase In Texas Pt 2

Important Things To Consider When Buying A Texas House

Part 2

What’s the most important thing that you should be remembering? You want to be certain you are in the right financial position in order to purchase a home irrespective of what is going on in the world. Consider these 3 things.

1. The Stability Of Your Income

First and foremost, you should be looking at this. Consider how likely it is that you are going to continue to have a stable income for the entire duration of the global pandemic. You want to consider whether or not your position is going to be safe in the current climate. Consider whether or not you have enough funds set aside in order to make the much-needed payments if you were to lose your income. If you are currently in a career that has a lot of uncertainty and that is prone to a lot of changes, you will want to hold off on purchasing a home until that changes.

2. Your Budget

You will need to pay a lot more than the down payment in order to purchase a home. You will need to pay for everything from the inspections to the appraisals to the loan origination costs, and more. Therefore, if you find yourself in a position where you are feeling unable to pay for everything, you will want to avoid purchasing a home.

Another big-budget consideration: Don’t necessarily allow your pre-approval status and amount to determine the total cost of a home you are wanting. A lot of prospective homeowners get pre-approved for a much higher mortgage than you can actually afford. Because of this, you should look at several things including your spending to ensure that you are figuring out the right budget. From there, you will be able to speak with your lender in order to translate that to a mortgage payment. You want to be able to afford the home you purchase.

3. The Reason For Buying A Home

You want to consider why you are looking to purchase a home. Maybe it’s because you just got married. Perhaps you are adding to your family. Or you might be looking to downsize prior to retirement. There are plenty of reasons you might be interested in purchasing a home. If your why isn’t necessarily good enough, perhaps you should hold off.

It’s important to understand that purchasing a home will effectively allow you to experience many of the highs and lows that come with it. If that doesn’t sound like something you want to deal with, it might be best to hold off.

While there is certainly no harm that can come from browsing the market, there is a big difference between looking to see what’s out there and buying. If you are looking to eventually buy a home, now is a fantastic time to begin looking for your next dream home.

The Texas Mortgage Pros

The Texas Mortgage Pros consists of some of the best professionals in the state of Texas. We are fully committed to providing the highest level of service to all of our clients. You will be able to take advantage of the best rates and multiple loan programs that are available in your area. We have mortgage professionals with years and years of experience who will be willing and able to work directly with you in order to guarantee that you are able to get a home loan that is curated to meet your needs and expectations. No matter if you are purchasing your dream home or your first home, we have the professionals on staff in order to ensure you get the best rates and the right program.

In order to speak with one of our friendly and experienced professionals, give us a call right now. We look forward to assisting you to find the home of your dreams. Click here to go to the first article in this series.

Knowing The Right Time For Home Purchase In Texas Pt 1

Important Things To Consider When Buying A Texas House

Part 1

Because of mortgage rates being so low because of the uncertainty caused by the pandemic, you may be thinking it might be the right time to consider buying a home. However, experts say you might not want to rush into such a decision. Below, we will be going over why according to real estate experts.

The Housing Market State

While the current market does offer inherent benefits for anyone looking to purchase a home. After all, in March the median list prices were up at around 2.2 percent annually. However, a month later, that number went down to less than 1 percent. This ultimately represented the least amount of growth in the last 7 years. As such, mortgage rates have been at a record low with the average 30-year fixed rates sitting at 3.4 percent for the week leading up to May 1.

Buyers are currently looking for 30-year mortgages and rates are very low. Because of this, it has become an opportune time to effectively purchase a home and take out a mortgage due to the historically low rates effectively outweighing the potential uncertainty that the pandemic has led to.

However, you shouldn’t simply be basing your real estate purchasing decision off this respective price drop. While the home prices in the market are expected to continue to fall around 2 to 3 percent just this year, you will find these prices fluctuating all of the time. You will pretty much always see properties that are priced outside of the market falling. Whereas, you will find properties that are competitively priced in the current market changing in prices very little.

What you really need to look at isn’t necessarily the decrease in home prices, but the increased demand for viable buyers. After all, your home could be competitively priced but you wouldn’t have any demand if there is no one that is capable of affording the home in the current conditions.

What If You Are Able To Find A “GOOD DEAL?”

While you may be tempted to simply jump on the first good deal you are able to find, you don’t want to get fixated on it. For one, you won’t necessarily be limited to finding ‘good deals’ in the midst of a crisis. Ideally, you want to try to identify a home that sits in the spot of being currently undervalued in the market and one that sits in a good neighborhood that has a lot of higher valued properties. This is what we refer to as a ‘diamond in the rough.’ You will certainly be able to find some good deals in the marketplace. However, all of the great deals are usually purchased before they even hit the open market.

Your timing is more important than anything. Even more so than being able to find a good deal. This will usually indicate how well you are able to do on the market. Generally, you will find buyers paying around market value for the homes they purchase, no matter what the circumstances lead to. While it’s certainly true that markets have both peaks and valleys, the real estate market is usually one of the more predictable markets and investments that usually have a steady upward trend. The timing will usually dictate how well you fare in any market.

You can use any of the interactive features on our website or call us anytime to speak to a diligent mortgage professional directly. We hope to work with you soon! Click here to go to the second article in this series.

The Role of Mortgage Lenders

Most people dream of owning a house in their lives. Capital for buying or building a lot is not always available for a segment of income earners. Additionally, if we are to rely on income capital to realize our dream of owning a home, well, it might take longer than we would want. A mortgage lender is an institution legally mandated by the state to provide loans for real estate purchases.

Top Texas mortgage lender will provide a borrower with money in the form of a loan to buy a house. The mortgage lender is legally mandated to claim part of the borrower’s salary or income generated by the house until the loan is repaid in full. Repayment of a mortgage, like other forms of loans, includes payment of the borrowed amount of money and the interest charged on the borrowed capital. 

Mortgage lending is a process involving a series of activities by both the lender and the borrower. The process of issuing a mortgage loan and what do you need to qualify for a mortgage in Texas is generally as follows:

1. A borrower makes an application for a mortgage loan. The borrower is expected to attach a copy of the sale agreement for the house, or other documents showing a rational and detailed acquisition/development cost of the house

2. The lender begins assessing the loan credibility of the borrower. The lender will often seek affirmation that the borrower is capable of repaying the loan based on a salary payslip, the borrower’s credit score and monthly income of the borrower and/or the present and future value of the real estate

3. The borrower commits to make an equity deposit as a down payment for the purchase of the house. Here, the lender is seeking to share the financial risk with the borrower to ensure the borrower has “put some skin into the game”. Upon settlement of the down payment, the borrower and the mortgage lender are principal partners in real estate investment

In most cases, the down payment can average from 10% to 30% of the purchase price of the house. The down payment also acts as a price-shock absorber for the lender such that the borrowers’ contribution will be eroded first by falling housing prices before the lender’s cash is eroded by the same market forces

4. The borrower makes monthly payments to pay back the loan. This is the last stage of the lending process and end when the borrower has fully repaid the borrowed cash to the lender both principal and interest on the principal amount

The borrower can negotiate for a balloon mortgage where the lender allows the borrower to pay interest on the loan in the initial years of the mortgage term. In a balloon mortgage, a big chunk of the principal amount of the loan is paid towards the end of the loan term. 

Two Reasons Why Mortgage Financing is Popular 

The first is that mortgage financing avails capital required to buy a house when the need for a house is still urgent. Many salaried individuals would rather own a house now and pay for the house later and over an extended period. Mortgage capital avails capital to acquire a house in the present, and later, the loaned capital is repaid by the borrower with an interest to compensate the lender for the loss of the right to utilize the cash in another investment. 

The second reason is that mortgage financing is cheaper compared to the borrower’s capital when buying the house. Mortgage financing is cheaper because it is often secured by the salary earned by the borrower or by the real estate being financed. It is important also to know what are the typical mortgage terms so it will be easier for you to understand how it works.

Think about it. In case of a bad loan and the mortgage lender seeks to recover their cash, the lender would simply foreclose on the property to recover their cash. There is, however, no recourse for the borrower; and the borrower is only paid what is left after the mortgage lender has claimed their share. 

Types of Mortgage Lenders 

A mortgage lender can exist as an insurance company, a commercial bank, a credit union, or a pension fund. A mortgage lender can either be a primary or a secondary mortgage lender provider. A primary mortgage lender provides loans directly to individual borrowers (potential homeowners) while secondary mortgage lenders provide loans to the primary mortgage originators. 

Each type of lender comes with their advantages and limitations and the suitability of a mortgage lender to finance a borrower is determined on a real estate and borrower’s case-to-case basis. You should also know what is the average mortgage in Texas so you can compare mortgage companies rates.

How to Choose the Ideal Mortgage Lender

A borrower must consider the terms of a mortgage loan proposal in assessing the suitability of a lender. Common loan terms of consideration include:

Loan Repayment Duration

The borrower should choose the lender more likely to offer a loan with a repayment period favorable to the borrower. If a large loan is to be repaid within a short duration, the repayment obligations have the likelihood of overwhelming the borrower.

Interest Rate and Loan Processing Fees

How can I get the lowest mortgage rate? Ultimately, interest rates are determined by the Central Banks of the state, however, over and above a certain rate, often the Central Bank Rate or Inter-Bank Lending Rate, mortgage lenders are allowed to charge premium rate based on risk analysis. A borrower should seek the mortgage lender with the lowest mortgage rates in the market.

It is important also for the borrower to consider the reputation and financial capacity of the mortgage lender before taking on a mortgage loan.


Top Tips On How To Secure The Lowest Mortgage Rate

Securing the best mortgage rates is a long-term benefit for all types of home buyers. It translates into lower monthly payments, paying a lot less interest over the years, and for certain buyers, it can pave the way to more expensive and larger property. 

Yet qualifying for a low mortgage rate does take a bit of work along with a good-sized down payment and great credit. To achieve the best results, you need to conduct your research to gain an idea of what appeals to you, then you can decide on the lender. Here are a few important strategies you can use to qualify for and shop for the lowest mortgage rate and what are the typical mortgage terms you should know. 

#1 Increase Your Credit Score

Conventional lenders tend to charge an interest rate that is higher for homebuyers with low credit scores. Increasing your credit score can go a long way towards qualifying for a lower rate. Many of the lenders will require a credit score of between 620 to 640 (minimum). In most cases, credit scores of 740 or more place the borrower in the top tier for conventional loan programs. 

How Much Can A Good Credit Score Improve Your Interest Rate?

Depending on the current market pricing, it is possible to decrease one-eighth to one-quarter percent off the interest rate when your score remains above 740. Mortgage experts recommend working with your lender to give you advice on the steps you should be taking to increase your score. 

#2 Compare Prices With Several Mortgage Lenders

What is the average mortgage in Texas? Many people will shop around before buying a TV or a new car, and the experts suggest that it is vital before deciding on which lender to use for a mortgage. A big mistake that many first time buyers make is to go with a lender that a real estate agent has recommended. Avoid settling on the first offer. 

Interest rates, in reality, can vary significantly from one lender to the next. This often has to do with their volume and the internal costs that are involved to process these loans. To make sure you find a great deal, many experts suggest that you get 3 to 4 quotes from different lenders, and ideally from different types of institutions such as online lenders, credit unions, and banks. 

When you start comparing interest rates, you must ask each company to provide you with loan estimates. Regardless of what the lender says, you can only validate each offering and then compare the different options when you receive official loan estimates. Unlike fee sheets or other types of documents that the lenders might give you, loan estimates are standardized documents that detail every cost linked to the mortgage. For the borrowers that do not have the interest or time to comparison-shop, Texas mortgage lenders can also help with the process. 

#3 Decide On How Long You Plan To Keep The Loan

This is a very important factor as it can alter the mortgage type you end up choosing. For instance, if you prefer not to take risks you may choose one of the fixed-rate home loans that offer maximum security. But if you only plan to keep the home for a year or two, it is also safe to go with a 5/1 hybrid-mortgage, where you will be paying 1% less when it comes to interest. For a $400,000 mortgage, this interest rate difference is more than $250 a month.

It makes sense that a shorter loan term will ensure a lowered rate. While spreads between the mortgage rates associated with loan terms may vary, in general, a 20-year fixed mortgage rate is around one-eighth of a percent lower when compared to the interest rates on a 30-year fixed mortgage rate. The 15-year fixed-rate loans are about three-eighths to one-quarter percent lower when compared to 30-year fixed-rate loans. 

#4 Save Up A Good-Sized Down Payment

What do you need to qualify for a mortgage in Texas? 20% down payments are no longer necessary for the majority of mortgage loans, yet when in search of a low rate, this certainly cannot hurt. This is because larger down payments will lower the loan-to-value ratio of your mortgage or the percentage of the price of the home that the lender finances. The lower LTV loans are often accompanied by a lower interest rate when compared to others since they are viewed as less risky for lenders. 

#5 Consider Buying A Single-Family Home

Condominiums are regarded as riskier investments since they decreased in value a lot more when compared to other home types throughout the “housing crisis”. The mortgage rates are typically one-eighth of a percent higher when compared to single-family homes. However, if you can put down a down payment of 25% or more, these interest rate add-ons are usually not charged.

#6 Conduct Your Research

You can either shop online, by phone, or in-person with the different mortgage lenders. What you should avoid is just going mindlessly to the lender that your realtor has recommended. Even if you have built up a great relationship with your realtor it is still important to compare the different interest rates along with negotiating the best deal for you. You should also know what does a mortgage lender does.

#7 Don’t Forget To Ask About The Fees

The different fees linked to loans are a key reason why it best not to compare prices based solely on the best advertised rate. In some cases, the advertised rate may be lower when compared to others due to the fees that are not included in this price. 

Some of the Texas mortgage lenders combine all the fees into a “loan preparation” fee, and others will separate the fee. You must ask each lender what the overall amount is going to be to settle the loan. In general, mortgage rates with a higher fee typically have lower interest rates. 

#8 Make Sure You Always Provide The Same Information

When requesting rate quotes, the information that you provide must be the same for each lender. This information includes:

  •  Your credit score
  • The use, type, and location of the property
  • The home equity amount that you have or the down payment size

It is important to note that the mortgage rates change frequently, so a quote that you obtained today, cannot be compared reliably against the quotes that you obtain tomorrow.

Qualifications Necessary for a Mortgage Loan in Texas

Many potential homeowners focus on interest rates as the only measure of qualification to secure mortgage loans for the purchase of their dream home. However, there are other minimum requirements expected of the borrower before they can qualify for mortgage companies in Texas

The requirements to access and secure mortgage loans from the Federal Housing Administration may vary from those required for a conventional mortgage loan, but the difference is not that big. The mortgage loan requirement for conventional mortgages is more stringent compared to those offered by the Federal Housing Administration. Conventional mortgages may, however, deal better long term benefits than mortgages from the Federal Housing Administration.

You should know what are the typical mortgage terms, and qualifications required for the processing of the conventional mortgage loan.

1. Down Payment of 3.0%

The borrower will be required to contribute at least 3% of the purchase price of the house to secure this type of mortgage financing. 

2. Paying for Insurance of the Mortgage Loan

Borrowers who can make a down payment of not less than 20% of the purchase price of the house are exempted from taking private insurance on the mortgage. However, borrowers with a lower contribution of the down payment of less than 20% of the purchase price of the house will be required to make annual insurance payments of between 0.15% and 1.95% of the outstanding loan balance. You can also search on what is the average mortgage in Texas so you will have an idea.

3. The measure of the Credit Score

The borrower of a conventional mortgage loan must attain a score of 620 to qualify for a mortgage loan. It is also not uncommon to find lenders who are willing to accept lower credit scores than 620. But for the safety of negotiations, the higher the credit rating/score for the borrower, the higher the number of financing options available. 

4. Proof of Active Employment

The borrower will be required to show proof of employment for at least two years before the date of loan application or assessment. Proof of employment may exist as tax return certificates or pay tabs provided by the current employer. This is just one example of what does a mortgage lender does to approved your application.

Proof of employment is part of the lender’s risk assessment criteria on the borrower to ascertain their ability to repay the loan based on verifiable income levels.

5. Debt-to-Income Ratio

Conventional mortgage lenders will ask for a debt-to-income ratio of up to 50%. This implies that conventional lenders will require up to 50% of your income to be available to repay the mortgage loan when debt service obligations fall due.

Qualification required for the processing of mortgage loans issued by the Federal Housing Administration include:

Down Payment of 3.5%

For the borrower to secure a mortgage loan, the lender will require the borrower to make a payment deposit equal to 3.5% of the purchase price of the house. A big part of the 3.5% down payment must come directly from the borrower’s sources and only 10% can be sourced from friends and relatives. 

The down payment is a testimony of the borrower’s commitment to the financing scheme. The down payment aligns the lender and the borrower’s interest in one direction in that both parties stand to lose money in case of non-performance of the loan.

Debt-to-Income Ratio of 31%

The Federal Housing Administration will analyze this ratio in two folds. The first one is done at the house-asset level where the ratio of the income projected to be generated by the house is measured against the amount of the periodic debt service payments required to retire the mortgage. This is called the front-end ratio and should be at 31% to enable the borrower to qualify for the mortgage.

The second analysis of the debt-to-income ratio involves the personal finances of the borrower where car and credit card loans and other loans owed personally by the borrower are measured against the level of the borrower’s income. This is called the back-end ratio and should be at 43% for the borrower to secure mortgage financing.

House to be Purchased must be for Owner Occupation

The house to be purchased must serve as the primary place of residence for the borrower for at least an initial period of one year. 

The requirements for borrowers seeking to buy a house and utilize the house space commercially are different as the intended use and value of the house may be different as well.

Proof of Active Employment

The borrower will require to show proof that they are employed and they are drawing a salary. The financier may seek tax return documents, pay tabs, etc. to assess the income-earning potential of the borrower.

A stream of salary income can be valued and used to finance a mortgage arrangement.

Paying for Insurance of the Mortgage Loan

Insurance for a mortgage loan is paid in two folds. The initial insurance payment is made at loan origination before loan closing and after the borrower has made the 3.5% down payment required before closing the loan. The amount payable at this time is 1.75% of the outstanding loan amount. 

The second fold of payment is made periodically every month and over the extended period before the loan maturity date. The total amount of insurance fee payable in the time is 0.85% of the total loan amount. This fee of 0.85% is divided equally among the number of months in the amortization period of the loan.

There might be slight differences in the requirements to secure a mortgage loan between the Federal Housing Administration and the conventional sources. However, the bottom line in both sources of mortgage capital is to eliminate risky borrowers and help avoid a spiraling of bad debts.

How can I get the lowest mortgage rate? Mortgage borrowers who are termed as risky/sub-prime borrowers generally attract high-interest rates and shorter repayment durations on mortgage loans. The opposite is also true, a good credit score, a higher level of income (compared to debt service) will generally attract mortgage financing much more easily and at better terms.


A Helpful Guide For A Texas FHA Loan Qualifications

8 Things You Need To Know To Qualify For A FHA Loan In Texas

Part 2

6. Choosing The Right Type Of FHA Loan

Different types of FHA loans are offered by lenders and the most common type remains 30 years fixed interest loan. There is also the option of an FHA loan with a fixed interest rate for a period of 10 to 25 years and you also have the option of an adjustable-rate FHA loan. With an adjustable-rate FHA loan, you will benefit from fluctuating interest rates at particular time periods.

For instance, a 3/1 adjustable rate FHA loan allows a fixed interest rate for the first 3 years but the interest rate is reset every year after that. You can get an adjustable loan with different periods of a fixed-rate term such as 3/1, 5/1, 7/1, or 10/1 with the 30-year loan. However, the FHA loans with fixed interest rates are more popular as adjustable-rate loans are deemed riskier by buyers.

7. Understanding FHA Loan Costs

An FHA loan also comes with the mandatory cost of private mortgage insurance. It is the insurance that protects the lender in case the borrower defaults and as a borrower, you need to pay an upfront fee as well as a monthly fee. It is essential for everyone who opts for less than 20% down payment.

8. Starting The Application Process

If you have checked everything and you think you will qualify for an FHA loan, and it is now time for you to apply, you should first try to get pre-approved with your chosen lender. It could be a credit union or local bank or an online mortgage lender or an independent mortgage broker.

Start the process with multiple lenders and ask for quotes for payments, fees as well as rates. Keep in mind that there is huge competition in the mortgage lending business even with an FHA loan, and even a slight difference in the closing costs or interest rates can help you save thousands of dollars.

The Texas Mortgage Pros

Here at The Texas Mortgage Pros, our team has mortgage professionals all over Texas. We are dedicated to helping our clients get the highest quality service for all their mortgage needs. We are committed to get our clients the lowest rates and to help them choose the best from multiple loan programs in The Woodlands, Tomball, San Antonio, Spring, Houston, Austin, and Dallas, Texas.

Our team of mortgage professionals has multiple years of experience and we will work with you to make sure that you get a customized home loan that is exactly right as for your situation and meets your expectations. Whether you are buying your first home or buying your dream home or refinancing a loan or consolidating debt, our team of highly experienced loan officers will make sure you are able to find the right loan at the lowest possible rate.

We strive to create a lasting relationship with our clients to allow us to serve our clients for many years in the future. We are different from other mortgage companies that operate nationwide. We promise that all your information will always be safe and private. We have a well-earned reputation in the lending community for trustworthiness and reliability.

Contact our expert mortgage professionals, call us today, or use our interactive tools that are on offer on our site. We cant wait to meet you. Click here to go to the first article in this series.