The truth is, lenders aren’t actually nosy. They are only looking to get all of the information they need for a protected or Qualified Mortgage.
The Consumer Financial Protection Bureau (CFPB) came up with what is known as a Qualified Mortgage (QM). This is a category specified for loans that place protections for lenders from being forced to purchase back a loan if the person borrowing defaults on his/her payments. In order to qualify for this, the lenders have to abide by the guidelines set forth by the CFPB in order to determine eligibility.
Lenders are looking to protect themselves during this type of process. Because of this, whenever possible, a lot of lenders look to make a home loan eligible for a Qualified Mortgage.
In order to grant one, they must prove that they followed all of the guidelines set forth by the CFPB when handing out a mortgage to a prospective home-buyer. By getting this information including proof of a buyer’s ability to pack back the loan, the more they will be protected. This is why lenders typically ask a lot of questions and dig into details.
Mortgages are not to have terms for a loan exceeding 30 years.
Mortgages are not to involve any type of condition or negative amortization that can increase the amount the borrower owes.
They cannot have balloon payments included nor can they have larger payments that only go towards the interest of the loan.
They must have specific limits on the debt to income ratio of the borrower and they must have limits on the total amount of upfront points and various fees the buyer is subject to.
Which Documents Should You Expect Your Lender To Ask You For?
You are likely to be required to provide the various documents that follow:
Financial statements from your accounts for the previous two months
The last two years worth of tax returns
A detailed list of your assets
A gift letter sent from whoever gave you any money that helped cover either or both of the down-payment and the respective closing costs
Your full credit report
Any recent pay stubs you have
A real photo ID
What Type Of Questions Should You Expect?
Below, we will go over some of the questions you can expect to impact your financial standing:
Have you ever been divorced? If so, what were the terms of the divorce?
Have you ever been directly involved in any type of lawsuit?
Have you ever sold a property through a short sale?
How long have you held your current job?
The Texas Mortgage Pros
Our team at Texas Mortgage Pros consists of all kinds of mortgage professionals scattered all over the great state of Texas. We are fully committed to providing each and every single one of our clients with the best quality of service to handle any mortgage needs you might have. We offer a combination of the lowest rates and multiple loan programs respective to the availability in your area including Dallas, Austin, Houston, Woodlands, San Antonio, Spring, and Tomball, Texas. No matter if you are a first-time buyer, purchasing a home you always dreamed of, or you are refinancing a previous loan agreement, we have a team of highly trained and experienced professional loan officers to help assist you to identify the correct loan program at the best rate for you and your family.
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 us or call us today!
Financing is of high concern for people with bad credit. They are already extremely stressed by the mounting debt they have to pay off. With that, the late fees and interest are zooming out of control if they’re not making their minimum payments. If you’re dealing with a lot of debt and can’t get a loan you shouldn’t panic, you should look at what is the easiest mortgage to qualify for. It’s still possible to get a loan; however, it will be harder for you. The best thing you can do is to continue to work on your credit score. You may need housing now. It’s harder to rent an apartment if you have a poor credit score than it is to get a housing loan. You may want to consider the following options:
Remember That Most People Do Not Have Excellent Credit
You aren’t perfect? Neither is anyone else. Only 22% of Americans had an excellent credit score in 2018. Most fall within the low end of the 700. You’re probably suffering from a credit score that is at least 690 or below if you are reading this article. You have a lot more options if your credit score is in the 600 verses below 600. Those with a score of 620 can even get a conventional home loan. What if my score is below 600? There’s still hope for you.
Co-signers are commonly used by young people as they do not have a long history of credit or an adequate income in most cases. How do I get a mortgage on my house? While it isn’t always possible, an adult may be able to get someone to co-sign for them. A stay at home mother, who has recently gotten divorced, may be able to convince her ex-husband to Co-Sign for a new place. The more willing he is to support his Ex-spouse, the better he will look in court during proceedings.
The Co-signer is promising that he or she will be responsible for the debt if you do not pay your mortgage. He or she will also be subject to a credit score reduction if he or she does not take on the debt. Parents often do not trust their kids enough to do this. It’s less likely it will happen for an adult that’s over 26. Let’s look at other options:
Make A Larger Down Payment
Many lenders will offer you a loan with a larger down payment if you have a poor credit score. There is a limit to this. This is more likely to happen if you have a credit score that at least falls above 590. Those with extremely poor credit scores may not be given this option and will have more strict conventional loan requirements.
State & Federal Programs
Some programs may be available for you. As an example, veterans can get help through VA financing. VA financing does not have stringent rules about credit scores and requires no down payment. Those who are willing to live in rural areas can get a USDA loan. These loans are insured by the government. You have less to lose if you can’t pay. Also, you should avoid urban housing if you are struggling financially. Urban housing is way more expensive anyway.
HUD housing does not require a credit score at all. Families with children, the elderly, and the disabled will be the priority for HUD housing. You cannot get HUD housing with a felony, especially if it is violent or sexual. HUD housing does have a max income cap. It may vary depending on dependents.
It’s Possible To Get Housing
The government does not want people to go without housing. That’s why there are many home loans in Texas. You may be living with a false perception if you believe that you do not qualify. This is especially true for those with a credit score in the 600s.
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 us or call us today!
Tips For Applying For A Conventional Loan In Texas
Conventional loans are the most commonly got loans in America. Perhaps, that is why they have obtained the title of being conventional. You should consider several factors before deciding to apply for a conventional loan. First of all, it is extremely important to make sure you meet the requirements to apply for one. Not everyone meets the requirements needed to obtain a conventional loan. They aren’t that stringent; however, they do require an adequate credit score. A poor credit score will be the most likely reason why you are turned down. Let’s look at all the conventional loan requirements in Texas:
Conformity To The Federal Housing Financing Agency
Conventional loans are given by a bank. They are not backed by the government in any situation. With that said, they do have to follow the laws set by the Federal Housing Financing Agency. Most of these laws pertain to loan limits and credit scores. Here are some of the requirements that are largely set due to the Federal Housing Financing Agency:
Adequate Credit Score
You will need to have a credit score that does not fall below 620 in almost all situations. Some banks require you to have a credit score of at least 640. Any credit score that is below 600 will most likely disqualify you from taking out the loan. So how can I get approved for a mortgage with bad credit? Do not become too discouraged if you have an extremely low credit score. There are many ways to fix it. Paying off credit card debt is the number one way to do it. It is important to try to at least make the minimum every month. Do not expect yourself to pay it all down in a few months.
Small Amount For A Deposit
You do not need to put down a large deposit if you are getting a conventional loan in most cases. This is designed to help homeowners become housed if they do not have a lot of liquid cash available. Some loan companies will have a higher minimum down payment. This rule is not standard. If you can pay at least 20% of the down payment. This will make you exempt from having to get private mortgage insurance in most situations.
The Limit Amount
You cannot buy a $10 mansion with a conventional loan. With that said, you can buy a pretty nice home if you are a decent qualifier. In most areas of the country, the loan limit is $510,400. That is enough for a small mansion in Texas. Those who live in more expensive areas can expect to see a loan limit of $765,600. A house can be bought in Brooklyn for $500,000. How do I get a mortgage on my house?
There is such a thing as a nonconforming conventional loan. Lenders have more freedom to decide the amount of the loan. At the highest, you will be able to get a loan of $2 million. The credit score you need to apply for this type of loan is much higher, so is the down payment.
Is A Conventional Loan A Good Idea?
A conventional loan is a great option for those who are at least middle class. Working-class and under individuals should consider loans that are backed by the government or have subsidized. You should be cautious if you’re worried that your financial situation may change. Remember, you do not have to have an outstandingly high credit score to get a conventional loan. With that said, you should not even try if you have a credit score below 600.
What is the easiest mortgage to qualify for? One of them is a Conventional loan can be a great way to get housing. They are the most popular choice among Americans. Those who are in better financial straits should even consider getting a non-conventional or jumbo loan to purchase a home. Getting a conventional loan will make it possible for you to get the home you want.
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. Contact us today Or Call Us @ (866) 772-3802
10 Important Questions To Ask Your Mortgage Broker Or Lender In Texas Part II
5. What Are All The Costs?
Mortgage lender fees also include third-party vendor fees such as credit reports, appraisals, pest inspection reports, title policy, taxes, recording fees, and escrow where applicable. The loan estimate should include an estimation of all these fees. Federal law requires that the broker or lender gives you a loan estimate when getting a mortgage loan. The lender should deliver the loan estimate when the loan application has been completed.
6. Is It Possible To Get A Loan Rate Lock?
Interest rates can change or fluctuate on a daily basis. If you believe that the interest rates are moving up, you should ask the lender if it’s possible to get the loan rate locked. A lender should charge zero to one point to lock the loan rate. Ask if the lender charges a fee for the service and whether the lock-in protects all the loan costs. Are they giving the loan lock-in writing and for how long will they lock the rate?
7. Are There Any Prepayment Penalties?
Some states don’t allow prepayment penalties. So, you need to ask about this. A prepayment penalty will allow the lender to collect an additional 6 months of unearned interest if you decide to pay off the loan early – ether by selling the property or through a refinance. If your state permits prepayment penalties, make sure you ask the lender how much it is. Get to know about the terms of the prepayment since some are in effect only during the first 2-5 years of the mortgage loan.
8. Will The Lender Approve The Loan In-house?
Make sure you get to know if the lender can handle its own underwriting or it’s assigned out. Underwriters will review the loan and issue certain conditions before rejecting/approving the mortgage. FHA and VA loans would take longer to process. But some lenders will automatically approve or disapprove a loan without sending it to the FHA or VA.
9. How Long Will You Take To Disburse The Loan?
The average time to process a loan is between 21 to 45 days. You should know about the closing date when writing a purchase contract. You should coordinate with the lender to get this date. Ask about the obstacles to closing the loan and how long the final application approval will take.
10. Do You Guarantee On-Time Closings?
Closing the transaction on time is important. Your lender should be able to give you a closing date with committing to the loan. You will have to face problems if the lender can’t disburse the loan on time. Ask about any increases in interest rates if the lock-in expires. What if you have to pay movers to reschedule? You need to ask all this from the lender before committing to the loan.
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.
10 Important Questions To Ask Your Mortgage Broker Or Lender In Texas Part I
Are you planning to get a mortgage loan? If so, you need to ask the right questions from the mortgage broker or lender before committing to the loan. You need to know about the type of loan you are getting and whether it’s right for you. Not asking the right questions may lead to many problems after you get the loan. Unanticipated and hidden fees are a big issue with most mortgage loans. That’s why you need to continue to shop for the right mortgage broker or lender until you feel confident about the answers you are getting.
Having a solid relationship with the broker is important to get the best deal in town. You will get better assistance, advice, and accurate information from the broker the more he or she knows you. You shouldn’t hesitate to share your personal information with the broker or lender including permission to run your credit report to build a solid relationship with the broker. Here are 10 questions to ask the broker or lender before committing to the loan.
1. Which Type Of Mortgage Loan Is Best For You?
A good lender will want to know more about you and your goal before placing different loan options in front of you. You wouldn’t want a doctor to suggest surgery before knowing your medical condition and history. Likewise, the broker should gather sufficient information before offering the best type of loan for you. Ask the lender or broker to explain the pros and cons of adjustable-rate loans, fixed-rate loans, negative amortization loans, and interest-only loans. Check out how each option would fit in with your personal situation.
2. What Is The Annual Percentage Rate & Interest Rate?
The annual percentage rate (APR) of a mortgage loan is a complex calculation. It adds the interest rate and other related lender fees and divides the sum by the term of the loan. But all brokers don’t compute the APR correctly. On the other hand, you cannot accurately compute the APR rate for an adjustable loan. The APR won’t account for early payoffs either. Ask the lender about the adjustment frequency if the interest rate is adjustable. Also, don’t forget to ask about the highest rate or cap, the margin, index, and the maximum annual adjustment.
3. How Much Down Payment Is Needed?
The 20% down payment is not always mandatory. For example, if you are well-qualified for the loan, you can get away with a down payment of 3% for some types of loans. But there are pros and cons to a lower down payment. Make sure you ask the lender about all the options you have.
One disadvantage of a low down payment is you will have to pay for private mortgage insurance if you put less than 20% down. You will have to pay an increased monthly payment and more closing costs under such circumstances.
4. What Are The Origination Fees & Discount Points?
Each point will be equal to 1% of the loan amount. For example, two points on a $100,000 mortgage will cost you $2,000. The more points you pay, the lower your interest rate will be. Points are also tax-deductible. Most lenders have origination fees in addition to points. They are also known as lender fees. You should ask about lender fees when you are trying to get information on a lender’s or broker’s policy.
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.
7 Steps To Take Prior To Buy Your First Texas Home
One of the most significant milestones in many people’s journey into adulthood is buying a home.
One of the things that you should start off doing is checking your credit. If you have a credit card, you might be able to check through your provider. If not, you can always get a free credit report. When checking, if you find issues that hinder your score, you will be punished with having a higher interest rate. If you find any inconsistencies or wrong accounts linked to your credit, you will want to get full documentation to dispute it. Mortgage companies will always take this into account when they are looking to decide whether or not to provide you with financing. If you don’t have a favorable rating, you want to look for ways to improve it prior to even getting started with the buying process. By raising your credit even a few points, you will be able to drastically improve your rates.
2. Budget Analysis
Understand the numbers. You want to factor in the total amount you have available to spend. Think about everything from how much you are spending on rent, debt, and other fixed costs that you have. While you might believe you can pay for a mortgage, it’s important to go into the process knowing you can. By examining your paycheck and where it is going, you will be able to see where you can improve your budgeting and you will be able to make adjustments to correct issues.
3. Debt Percentage
When you are examining your debt percentage, you want to look to see if you meet the qualifying criteria. A mortgage company is likely going to require that you have 33 percent of your monthly income that you can devote to the cost of the mortgage. Whereas, 38 percent can include consumer debt. If you aren’t within this range, you are likely not going to qualify.
4. Your Down payment
The mortgage company will look very closely at your down payment and its source. They will look at everything from bank statements to money being transferred in and out of your accounts. Because of this, you want to ensure that you are not spending money gifted from friends or family instantly. Rather, you will want to wait for it for a long period of time. The company will also want to be certain that you have the funds available, but also that you are able to cover any and all of the closing costs associated with the sale.
5. Know The Other Costs
When you are looking to purchase a home, you want to be familiar with the other costs that are involved with the home buying process. It’s important that you have considered them. While you might have been paying rent on a monthly basis, you will be taking on a lot of additional costs including but not limited to real estate taxes, a potential association maintenance fee, utilities, homeowner’s insurance, and annual maintenance and repair costs. These costs are likely to be brand new to you have never been a homeowner.
6. Interest Rate & Mortgage
When you enter any mortgage site, you will be presented with so many choices it will make your head spin. Not only will you see different types of rates, but you will also see varying lengths and more. Along with this, you will have to figure out whether you want to lock the rate in or allow it to float throughout.
7. Local Market
You need to understand your local housing market in the area where you are looking to buy. If homes are at an all-time high and the bids are skyrocketing, be wary of jumping in. Housing prices are in a constant state of flux and by purchasing at the wrong time, you can be costing yourself thousands.
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.
Useful Advice For Finding The Best Possible Texas Mortgage Lenders
Going through the process of finding a great mortgage lender and then getting pre-approved for your own loan is a sequence of crucial steps that must be done in a certain order. When you work through each of these steps systematically, you put yourself in a great position for the fast approval of a good loan.
While you likely aren’t too worried about doing heavy vetting of the lender you pick for your loan, you might want to reconsider. Picking your mortgage lender will wind up being among the more substantial choices you make throughout the whole housing purchase process. Keep in mind, you’re going to be working with your chosen lender for several decades into the future.
How to identify great mortgage lenders? Well, mortgage lenders are professionals working for financial institutions, such as banks, who are responsible for the approval or rejection of new home buyer loan applications. If you’re like most people, then your pending home purchase might just be the single largest financial transaction of your life. It’s crucial to make sure the best professional is at your side in order to guide you through this process.
Finding a great lender means identifying a veteran professional that works with your particular loan specifics. You need a lender who actually works with the kind of loan that you’re hoping to get, one who can approve the loan amount you want, and one that’s able to work with borrowers that fit in your particular credit profile. The right lender selection might just make or break the entire home-buying experience for you.
How Do You Find Mortgage Lenders?
1) Check Out Your Credit Score
Prior to starting anything in regards to your search for a mortgage lender, check your personal credit score. You need everything lined up just right, and your credit score is one of the biggest factors that will impact your approval or denial for any mortgage loan. Potential lenders use your credit score in determining your creditworthiness, what sort of rate they can provide you, and how much total they can safely lend to you. Use online services to find out your score as it is now, so you’ll have a better idea of what you can and can’t qualify for.
2) Identify Credit Report Errors & Dispute Them
While having knowledge of where your credit score is proving helpful, you need to take the extra step of being sure the report is accurate. You want it to demonstrate your current financial picture in a good way. Credit reports are known to have negative marks, errors, and mistakes that shouldn’t be there.
Take enough time to go through the whole report entirely to be sure any and all information is accurate and current. When you find any discrepancies, contact the institutions or companies responsible for the erroneous information in order to get things corrected. Even the smallest of discrepancies can leave a serious effect on your overall score, and that can render you unable to get a pre-approval for your mortgage loan.
3) Collect All The Require Documents
Prior to shopping lenders and putting in mortgage applications, you need to be sure that you have collected all the necessary documents in one single place. You can make this whole process far more painless if you do all this before you look. The most crucial documents you’re going to need are copies of your credit reports, tax returns, bank statements, asset statements, photo ID, a detailed renting and/or purchasing history, and pay stubs or tax documents such as W2S and 1099S. If anyone is giving you money for assistance in home buying, then you need written confirmation of those funds that clearly stipulate the gift instead of a loan, as well as an explanation of the relationship that person has with you.
4) Compare & Contrast The Various Kinds Of Loans That Are Available
Once everything is ready on your side of things, you need to start looking over the available loan options. If you’re totally new to all of this, then you might not be aware that not every loan is the same. Various kinds of loans you can pick from including their own pros and cons, as well as different limits and terms, among other things. Popular options include interest-only loans, fixed-rate loans, conventional loans, VA loans, and ARM or FHA loans, which stand for Adjustable Rate Mortgage and Federal Housing Administration.
5) Ask Trusted Sources For Suggestions
It’s a good idea to consult veteran buyers and those with industry experts for insights into the whole process. They can provide you do’s and don’ts that only get learned from experience. Just make sure you can trust your sources of suggestions and recommendations. You might have family and friends offering you advice, and they likely want the best for you, but good intentions don’t always mean sound financial advice. Understand the sources of recommendations in order to weigh the suggestions properly.
6) Figure Out What Matters To You
Once you have sufficient information about your options, the time has come to decide what’s important to you and what isn’t. Make sure that you know the differences between what you need and want. Writing down your list on paper can really help with this part. It’s just not possible to know what it is you’re seeking if you don’t actually know what specifically it is that you want. Have a fixed target in your head before you shop lenders.
7) Compare Every Lender Based On Your Most Crucial Criteria
Once you finish each of the six prior steps, now you can start looking into lenders. If you save this particular step until the end of the process, you’re making sure that you’ve had the chance to get fully educated about the whole process. This will protect you from committing needless errors, missing good opportunities, or misinterpreting anything that might cost you dearly. In this step, you need to identify any potential lender who meets your criteria, and then you can start comparing them all. Look at factors like lender reputation, conditions, terms, rates, and anything else that might apply to your own home-buying situation.
Purchasing a home should be a wonderful adventure, provided that you do all that you can to make sure it all proceeds smoothly. Picking your lender is one of the biggest choices you’ll make along the way. It’s easy to find mortgage lenders, but finding the right one isn’t quite so simple.
If you want to purchase a home this year and wondering how to qualify for a mortgage, you can find the right loan program by learning the minimum borrowing guidelines. In 2020, mortgage options will be available at relatively higher loan amounts that indicate the increasing home prices across the U.S.
By going through the guidelines for the most popular loan types, you should know the amount of mortgage that you can qualify for.
Undoubtedly, conventional loans are the most common mortgage option, but no government agency guarantees them. Compared to the borrowing requirements for government-insured loans, Freddie Mac and Fannie Mae set conventional loan standards, which are stricter.
If you want a mortgage for a more expensive home, it’s much easier to qualify this year since loan limits are increasing up to $510,400 for a majority of the country in 2020. For conventional lending, below are the latest minimum mortgage loan requirements.
A Conventional Loan’s Current Minimum Requirements
Down payment. For conventional loans, the minimum down payment is usually 3% and can come as a gift from a family member or simply your money.
Mortgage insurance. The lender needs security with private mortgage insurance (PMI) for conventional loans that have less than 20% down in case you default. Each year, you’ll pay anywhere between 0.15% and 1.95% of your loan amount; however, the premium can even exceed 2.5%, especially if you have a small down payment and a low credit score. Typically, you pay the premium as part of your monthly payment, but you can also pay in a lump sum upfront during closing.
Employment. Since lenders need proof of your steady income, they’ll review your income and employment history from the past two years. Those with variable incomes and self-employed borrowers alike will need to present extra paperwork to verify income.
Credit score. For a conventional mortgage, the minimum score is 620. Most likely, you’ll receive a more favorable interest rate offers with higher credit scores.
Income. There are no income limits with many conventional loans. Freddie Mac’s Home Possible loans and Fannie Mae’s Home Ready, however, demand that borrower’s incomes should fall within that area’s income limits.
Occupancy. Generally speaking, conventional financing can be useful in purchasing a primary residence, an investment property that you can rent out, or a second home (also called a vacation home).
Debt-to-income ratio. The measure of your overall debt divided by your specific gross income is your debt-to-income ratio (DTI). A DTI of 45% or less is much preferable to most conventional lenders but might extend it to 50% with considerably higher credit scores, along with additional cash reserves. Mostly, borrowers with DTI ratios exceeding 45% might be needed to have a minimum credit score of 740 by private mortgage insurers.
One of the most accessible home loans to obtain is a mortgage-backed by the FHA or the Federal Housing Administration. Since the FHA insures the mortgage, there are more favorable terms and rates available with FHA-approved lenders, particularly to first-time homebuyers.
Borrowers trying to qualify for a mortgage for high-priced homes will have some relief in 2020. In most parts of the country, there has been an increase in the FHA loan limits to $331,760 in 2020. Affluent areas might receive even more FHA bang for the buck since the maximum loan amounts can stretch up to $765,600.
An FHA Loan’s Current Minimum Requirements
Down payment. Whether it’s from your funds or as a gift, FHA demands a 3.5% minimum down payment. With a credit score ranging from 500 to 579, the down payment goes up to 10%.
Mortgage insurance. There are two kinds of mortgage insurance when it comes to FHA loans. The upfront mortgage insurance premium (UFMIP) can be rolled into your particular loan and is often 1.75% of the loan balance due. As part of your monthly payment, you’ll also incur an annual mortgage insurance premium (MIP), and those costs vary between 0.45% and 1.05% of the loan amount. Regardless of credit score, FHA mortgage insurance premiums are similar.
Employment. Typically, FHA loan requirements focus on the consistency of employment and earnings for the last two years. Job hoppers must explain gaps or changes in employment.
Credit score. With a 10% down payment, you can have a low credit score of 500. Homebuyers will require a minimum score of 580 if they make a 3.5% down payment.
Income. FHA loans have no income limits. In most parts of the country, the maximum FHA loan is, however, capped at $331,760 as opposed to $510,400 for conventional loans.
Occupancy. Whether it’s a single-family or multi-unit property, the property must be your primary residence for a minimum of one year after buying it.
DTI ratio. FHA loans have a front-end DTI ratio of 31%, while the back-end ratio is often 43%. Only housing-related costs matter with the front-end ratio, such as your insurance, property taxes, and monthly mortgage payment. Meanwhile, the back-end ratio considers credit card payments, car loans, mortgage payments, and other recurring debt payments. With proof of extra cash reserves or strong credit scores, higher DTI ratios might be approved.
VA Loan Requirements
Generally speaking, the U.S. Department of Veterans Affairs makes it much easier to qualify for a mortgage loan, especially for active-duty military personnel, eligible spouses, veterans, and reservists. There are no longer loan limits with VA mortgages in 2020. That implies that VA borrowers may be in a position to purchase homes with VA financing instead of a jumbo loan, or perhaps financing for loans that surpass conventional loan limits.
A VA Loan’s Current Minimum Requirements
Certificate of eligibility. If you want to qualify for a VA loan, a VA loan certificate of eligibility (COE) will be necessary since it proves you satisfy the military service requirements demanded by a VA loan. Most lenders can acquire a COE online; however, veterans and military personnel can apply for one online.
Mortgage insurance. No PMI is needed since the VA guarantees loans given to eligible borrowers.
Down payment. For a VA loan, no down payment is needed. Lenders might, however, demand a down payment, especially if the loan surpasses standard loan limits. The source of your down payments can be your funds or simply a gift from an employer, a close friend, a relative, charity, or government agency.
Funding fee. Many VA loans have this fee to defray the program cost to taxpayers. Generally, the amount varies depending on the down payment amount, the VA loan benefit usage, and the type of service. If military borrowers have service-related disabilities, they might be eligible for a waiver. VA funding fees jump to 0.15% for those borrowers who come up with 10% or less of the buying price. That sums up to an additional $1,500 in funding fee costs per $100,000 borrowed.
Employment. Proof of two years of employment is necessary, and the only exceptions are recently discharged veterans.
Credit score. Although there’s no credit score requirement with a VA home loan, VA-approved lenders need a 620 score.
DTI ratio. 41% is the preferred DTI ratio. VA-approved lenders might approve higher DTIs, especially if the borrower has additional money leftover after-tax deductions, or has residual income, and there’s a subtraction of monthly maintenance costs. Generally, the amount required varies depending on your family size and location.
Occupancy. Primary residences are fundamental to VA loans.
Typically, the U.S. Department of Agriculture (USDA) provides a mortgage program made to allow low- to moderate-income families to purchase homes in rural areas. Apart from restrictions on the home location, USDA mortgage loan requirements include income limits.
A USDA Loan’s Current Minimum Requirements
Down payment. For eligible USDA buyers and properties, no down payment is needed.
Home location. The location of the home should be within one of the USDA’s assigned rural areas if you want to be eligible for a USDA loan.
Mortgage insurance. Mortgage insurance isn’t a requirement with USDA loans.
Guarantee fee. A 1% upfront fee is often charged, as well as an annual fee of approximately 0.35% of the loan amount. Like the mortgage insurance fee charged on an FHA loan, the annual fee is rolled into the monthly mortgage payment, and the upfront fee financed.
Income. For USDA loans, it’s usual to have proof of income history and two years of job. Considering all household member’s income is required, irrespective if or not they apply for the loan. Income limits are also a thing with USDA loans, which vary by family size, county, and city. Using USDA’s map tool, find out your area’s income limit.
Credit score. A minimum credit score of 640 is needed with USDA mortgage loans for automatic approval, as long as income and employment requirements are met. Homebuyers with lower credit, however, might still be approved in case a temporary hardship impacted their scores, or if the new housing payment is less compared to the amount the borrower is paying.
DTI ratio. For USDA loans, 29% is the maximum front-end ratio, and the maximum back-end ratio is 41%. With higher DTI ratios, borrowers might still qualify with a stable income history, large cash reserves, and a credit score ranging around 680 or higher.
Occupancy. Only primary residences matter with USDA loans.
Factors To Determine The Texas FHA Loan Amount You Qualify To Borrow Or Can Afford
Many of the questions that we get from your potential applicants of FHA (Federal Housing Administration) loans and readers tend to touch on issues related to ‘how much’. We get tons of frequently asked questions (FAQs), and some of the most common inquiries include:
• What minimum income level do I need to qualify for the FHA loan?
• What kind of house can I afford once my FHA loan is approved?
• What mortgage amount can I get with the FHA loan?
The goal of this post is to answer these frequently asked questions. We will start by going over the official application guidelines for an FHA loan as stipulated by the HUD (Department of Housing and Urban Development) of America. Next, we shall examine how financial institutions and mortgage lenders implement these guidelines when offering mortgage loans. We also will delve into other factors that these lenders consider to determine the FHA loan amount you qualify to receive based on your income.
FHA loans are offered at 43% debt to income ration. That means your combined debts after taking the loan should not exceed your gross monthly income by more than 43%. Fortunately, there are exceptions to this rule. For instance, you can get an FHA loan approved if you have a DTI (debt to income ratio) of up to 50% if you have a significant amount of savings in your bank account, or numerous sources of income.
What Mortgage Amount Can You Take With An FHA Loan?
In as much as there are directives regulating what amount you can get when applying for an FHA loan, the lender does have some substantial prerogative in decide the mortgage amount to offer. In short, the lender can determine how much of the FHA loan to give you based on your gross monthly income, the HUD withstanding.
The lender will first review the official HUD Handbook 4000.1 to examine the FHA loan guidelines when determining the much you qualify to get for the FHA loan. The HUD handbook is commonly referred to as the Single-Family Housing Policy Handbook.
Section II-A-5 of the handbook stipulates the “approvable ration requirements” in which the term “ratio” is used in reference to the DTI (debt to income ratio). The DTI is based on a comparison of the cash amount you can get from your income in relation to what you spend on servicing your recurring debts.
As such, the DTI is one of the most crucial factors that influence the mortgage amount you qualify to borrow or receive when applying for an FHA loan. It also determines the type of house you can afford to buy. The DTI might be one of the influential elements used to calculate the much you can borrow when purchasing a home or property, but it is not the only decisive factor that lenders consider.
You should be aware of two essential rations when acquiring an FHA loan; these are:
Total Mortgage Payment to Effective Income Ratio (PTI)
It indicates the much from your gross monthly income that can be used to service your housing costly – primarily meeting your mortgage loan obligations. The PTI ratio is also referred to as the ‘front-end debt’ ratio.
Total Fixed Payments to Net Income Ratio (DTI)
It indicates the much from your gross monthly income will go towards the servicing of your monthly debts, such as your credit card payments, mortgage payments, or car payments. The DTI is also known as the ‘back-end’ debt ratio.
To have your loan application approved, you must meet the 31% – 43% threshold. That means your mortgage payments will have to take up less than 31% of your gross monthly income while the total monthly debts should consume less than 43%. You should use this rule when trying to determine the FHA loan amount to borrow. It is one of the determinants mortgage lenders will use to calculate the FHA loan you qualify to receive.
An individual applying for an FHA loan has a gross monthly income of $6,000. The applicant should have total debts (inclusive of credit card expenses, car payments, mortgage, and other recurring expenses) that are less than $2,580 each month. That figure is determined by the following calculation (gross monthly income X 0.43). And the total mortgage payments should be less than $1,860, which is a figure reached using the following calculation (gross monthly income X 0.31).
Keep in mind that the applicant can qualify to get the FHA loan if the lender determines that the borrower has a Total DTI of up to 50%.
Attaining a total DTI of up to 50% is something that is possible based on several exceptions applied to the 31% – 43% rule. A mortgage lender can do checks and find ‘compensating factors’ that indicate the applicant is an excellent candidate for the FHA loan. The then lender can give some leeway for a higher back-end ration that can be as much 50% in some situations. Some of the ‘compensating factors’ considered by mortgage lenders include:
• Residual income
• Significant additional income not reflected in gross monthly income
• Minimal increments in housing payments
• Documented and confirmed cash reserves
Keep in mind that the mortgage lender will also take into account many other factors before determining if you qualify for the FHA loan and the amount to offer. Therefore, if you are thinking of applying for an FHA loan, you should contact a lender that has the recognition and approval of the HUD (Department of Housing and Urban Development) of America. Ask them to be upfront about your prospects of qualifying for the loan. Answering this question will be a matter determined by doing background checks on your income level, debt situation, and credit history, among other things.
Which Kind Of House Can I Afford To Buy?
At this point, we hope that you have enough knowledge about the amount of mortgage you can get with an FHA loan. But it only is half the picture. You must know what type of house you will be in a financial position to afford when applying for an FHA backed mortgage. You do not need to rely on an expert to figure this out.
Always remember that it is possible for an FHA mortgage to be too huge for you to service or it can become affordable as time passes depending on how your financial situation fluctuates. In some cases, loans become a financial burden in the long that many people cannot afford and thus they face foreclosures.
That is why we highly recommend that you create a basic housing budget so that it helps you avoid getting yourself in a financial crisis. It will help you know the kind of house you can comfortably afford based on the much you qualify to get when you apply for the FHA loan.
The wisest investment decision you can make when purchasing a home is to ensure that you can comfortably finance the mortgage. That means you able to make the monthly mortgage payments and meet other recurring monthly expenses while also managing to save some money.
How Can You Determine The Type Of Home You Can Afford?
Your net monthly income is the total payments you receive at the end of the month. So, the goal is to figure out your total expenditure which means knowing the costs your accrue each month on your housing-related expenses including gas, food, electricity bill, car payments, credit card payments, entertainment, and your savings contributions.
• Subtracting monthly expenses from the net income
Once you have determined the much you spend on your monthly bills, you then need to deduct that amount from the net monthly income. What you are left with is what you go towards servicing the mortgage.
Keep in mind that you do not have to put all that money into that basket meant for repaying the FHA loan. You also need to set up an account for emergency funds. Overall, once you have deducted what you need to cater to your monthly expenses, you will then assess what is left to know what you can save for a rainy day and the much that will be for mortgage payments after you have purchased your new home.
You will be expected to honor your loan obligations. But that does not mean that serving the mortgage should strain your pockets. You also should ensure that you have some bit of money left at the of the month for a rainy day. You never know what tomorrow has in store for you; thus, you should have some cash lying around to cater for the unexpected expenses, such a car repairs and hospital visits. Exercising financial prudence dictates that you sort your income to ensure that it caters to your expenditures, debts, and you also manage to set something aside for emergencies.
When you implement the tips discussed above, you will be able to determine which is the ideal type of house you can afford using the FHA loan or any other kind of mortgage.
Which Other Things Do I Need To Get An FHA Loan Approved?
First and foremost, you should have enough monthly income. Mortgage lenders will examine your level of income and consider this when determining if you qualify for a loan and which type and amount to offer you.
Besides having a dependable monthly income, you also must take into account other factors that influence your chances of getting the loan request approved. Some of these things include:
• Down Payment
When you are looking to get an FHA loan, you will need to provide 3.5% of the price of the house you plan to buy, or its appraised value. That is why you must consider this when you are researching the kind of home you can comfortably afford if you will be relying on an FHA mortgage program to help finance the acquisition of the property.
• A Good Credit Score
According to the HUD guidelines for FHA loans, borrowers seeking the maximum amount on an FHA loan should have a credit score of 580 or more. They also should be able to make a 3.5% down payment for the loan. Note that some mortgage lenders will require loan applicants that want the maximum amount to have a higher credit score.
• Manageable Debt
Lastly, you should not overlook the DTI (debt to income ratio) for the FHA loan. It is one of the crucial determinants that lenders consider when approving a loan request.
And there you have it; we have sufficiently answered the two most essential questions, namely:
1: How much of an FHA loan can I get based on my monthly income?
2: What type of house can I afford to buy with the FHA loan?
The above are the pertinent questions you need to think about when applying for this loan. Most importantly, you should come up with a basic housing budget before you start the application process for the FHA mortgage.
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 us or call us today!
Tips To Get Approved For A Texas Mortgage For Self-Employed
You are self-employed and want to get approved for a mortgage. It might seem difficult but it’s not when you have the right paperwork.
Self-employment offers a number of benefits. You are free to work anywhere you want and anytime you want to work, and there is no boss looking constantly over the shoulder. However, it has its own challenges, especially at the beginning. When you are self-employed, you might find it difficult to get approval for a mortgage as lenders typically find it harder to assess the income of self-employed individuals.
However, it doesn’t mean that you won’t get approved for a mortgage. You need to understand the process used by lenders for assessing self-employed income for mortgage applications. You need to do certain things to make your application more appealing. Here is a list of some of the important things you should know about getting approved for a mortgage when self-employed.
Biggest Challenge – Enough Income For Mortgage Approval
The most important thing lenders look at when approving mortgage applications is that the borrower should be able to pay back the money which means you need to show proof that your income is enough to easily cover the mortgage payments. Having a W–2 makes it easy as it shows the lenders that you have a steady paycheck and you will continue to earn money to cover the mortgage.
Being self-employed also means a fluctuating income and there is also the possibility of your income shrinking enough that you are unable to pay the bills. This is the reason, mortgage lenders typically ask for proof of two years’ worth of income from self-employment in order to ensure that a study revenue stream exists. You will need to provide the last two years’ tax returns and you might also be asked for a complete list of your existing assets and debts. If you are a business owner, you might be asked by the mortgage lender to provide two years’ worth of profit and loss statements for your business.
Things get tricky for you as mortgage lenders take out all the deductions when considering your income. It means the expenses you have written off for the business including costs of business trips, office supplies and phone and Internet services among others for taxes also lower your income that is considered by mortgage lenders. This increases the debt to income ratio for you. The debt to income ratio is used by lenders to figure out the amount of money coming in and going out every month. You are unlikely to get approved for a mortgage in case your debt to income ratio crosses 43%. Simply put, if you are making debt payments that are more than 43% of the income, you are unlikely to get approved for a mortgage.
However, you should not have issues getting approved for a mortgage in case you are making steady money from being self-employed and you can show documents to prove that your income has not gone down or even risen with time.
In addition to these, mortgage lenders also consider some other factors.
Important Factors Other Than Income For Mortgage Approval
As mentioned above, your debt to income ratio is the most important thing lenders look at when they consider your mortgage application. If you’re making $ 1 million a year but $ 900,000 is used for paying off existing debt, it is going to be of no use. Therefore, you need to make sure that your debts are kept down to a manageable level. You need to ensure that your debts do not exceed 43% of the income and ideally, this ratio should be kept under 36%.
Lenders also check your credit score. It simply shows how responsible you are with borrowed money. The credit score is used by lenders for assessing the risk of lending to an individual. If your credit score has a number of repossessions and late payments, lenders will be hesitant to approve your mortgage. Similarly, if your credit utilization ratio is high, it will also affect your chances of getting approved. The credit utilization ratio is the ratio of the amount of credit you are using to the amount of credit that is available to you. Needless to say, your credit score should be kept as high as possible to improve your chances of getting the mortgage approved.
Mortgage Application Denied – Things To Do Next
In case a lender denies your mortgage application, the first thing you need to do is figure out why it has happened in order for you to take corrective measures. You should get some kind of signal from the lender why your application has been denied and that should be a good starting point for you.
In case your application was denied due to a lack of enough income, there are few options available to you. You have the option of making a bigger down payment if that’s possible for you as that will reduce the amount of loan. You also have the option of finding a cosigner who will cosign on the mortgage for you. Keep in mind that co-signing carries a lot of risks and there are no rewards which means it’s not something that should be asked slightly.
If your application has been denied due to having too much debt, your focus should shift to paying off the existing debt before reapplying for the mortgage. It has a couple of benefits. It will bring your debt to income ratio down and it will also bring down the credit utilization ratio which, in turn, will help in boosting your credit score.
You should be able to get the mortgage approved with one of the above-mentioned strategies. If things do not work out, you might have to wait for some time and try again later. During this time, you should try to increase self-employment income and once you have started earning a bit more money, it’s time to reapply. All the necessary financial documentation should be kept ready to give to the mortgage lender when you reapply.
Self-employed individuals need to jump through a couple of extra hoops in order to get approved for a mortgage. It’s possible to get approval but you need to prove that you are making a steady income through your business.
The Texas Mortgage Pros
The team of Texas Mortgage Pros has mortgage professionals from all over Texas. We provide the highest quality service to our clients for their mortgage needs. We combine it with multiple loan programs and the lowest rate in your area – The Woodlands, Austin, Houston, Dallas, Tomball, San Antonio and Spring, Texas.
Our team of professionals has a number of years of experience in the industry and will personally work with you to make sure that you get a specifically tailored home loan for your specific situation and expectations. Whether it is buying your first home or a home you have always wanted, consolidating the existing debt or you want to refinance a loan, our loan officers will work with you to find the best loan program tailored to your needs at the lowest possible rate.
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 us or call us today!