Refined Guidelines & Requirements To Qualify For A Mortgage Loans In Texas

Helpful Tips On How To Qualify For A Texas Home Loan Programs

Purchasing a home for the first time might appear to be an extremely daunting process, and in most cases it actually is.

In this guide, we will give you information on how the process works, along with what loan type suits you best if you qualify.

In this post, we have covered qualifying income, credit score, and down payment requirements, information about debt-to-income ratios, and more.

Each of the mortgage programs is linked to different requirements in order to qualify.

What Type Of Down Payment Will Do I Need?

In general, the need for a 20% down payment is no longer necessary in order to qualify to purchase a home. There are many mortgage types that do not require down payments or very minimal down payments. You are also not required to be a 1st-time home-buyer in order to qualify when it comes to these programs.

The FHA loans are among the more popular mortgage types that are used today. This has to do with its flexible requirements. In the majority of cases, you only need a 3.5% down payment. Each program that we have listed below allow you to utilize gift funds as a form of a down payment.

Here are the down payment requirements for each loan type:

  • USDA Loans – No down payment
  • Conventional Loans – 5% to 20% down payment
  • VA Loans – No down payment
  • FHA Loans – 3.5% down payment with a 580 credit score (10% down payment for credits scores between 500 and 579)

What Type Of Credit Score Will Do I Need To Qualify For A Mortgage?

Perhaps the biggest factor involved in deciding whether or not you are eligible to apply for a mortgage involves your current credit score. If your credit score is great there is nothing to worry about. On the other hand, if your credit score is poor, it becomes harder to obtain approval when searching for home loans. A credit score of 680 or higher is ideal. Some of the lenders will only accept credit scores of 640 or higher, while others may accept scores that are lower.

There are requirements for a set minimum credit score for each of the loan programs. However, the lenders are not required to follow these requirements and usually set their own guidelines when it comes to credit scores. If your credit score is low, it is important to request a copy of the report.

Below is a list of the minimum requirement for credit scores that you will typically find for each of the mortgage types.

Here are the lowest qualifying credit scores:

  • Conventional Loans: 640 credit score
  • USDA Loans: 620 credit score
  • FHA Loans: 580 credit score
  • VA Loans: 620 credit score (some of the lenders might still approve a 580 or higher credit score)

Income Guidelines To Qualify For A Mortgage

To make sure you are eligible for a mortgage, you have to provide proof that your current income is consistent and sufficient. If you receive a monthly salary then this task is simple. However, for those that work for commission-based jobs or self-employed borrowers, this becomes more difficult.

You will need a minimum of 2 years of your income documented from one company, or within the same field or industry in order to qualify. If you are a commission earner, you will be required to provide an average of your income over the last 2 years of your tax returns.

Income That Will Help You To Qualify For A Home Loan

  • W-2 Salary or Income
  • Bonuses and Overtime
  • Income received from a part-time job
  • Seasonal jobs
  • Income received from a 2nd job
  • Child Support and Alimony ( documentation is required)
  • Self-Employed income

Income Regarded As Non-Qualifying

  • Unemployment pay
  • Income received from Rental Properties
  • Gambling
  • VA Income
  • Single bonuses
  • Unverifiable income
  • Co-signer or non-occupying income
  • Income received from winning the Lottery

The Documents Required For A Mortgage

There a number of documents that the loan officers require in order to process loans. To save time and frustrations make sure you have all the right documents prepared before you approach your lender. Here is a list of what you will need:

  • 3 months past bank statements
  • W2’s over the last 2 years
  • Last 2 years of your tax return
  • 3 months of pay-stubs
  • Divorce decree
  • List of your assets and your debts
  • Documentation for additional income

FAQs On Mortgages

How Do I Qualify For A Mortgage?

In order to qualify your credit score should ideally not be below 580. You will need to provide documentation that proves a verifiable and consistent income with tax returns and W2s. Depending on the loan you might need to supply a down-payment.

What Type Of Credit Score Do I Need To Secure A Home Loan?

The FHA loans provide a way for borrowers with credit scores of between 500 and 579 to apply for a loan, but they will need to put down a 10% down payment. However, the rest of the lenders will not process loans for the borrowers in this credit score range. You will need a credit score of 580 or higher to improve your chances of approval.

What Type Of Down Payment Is Needed To Purchase A Home?

USDA and VA don’t require down payments. The FHA loans usually require a 3.5% down payment.

About The Texas Mortgage Pros

The team at Texas Mortgage Pros is made of mortgage experts from across Texas. We have a commitment to offering each client with high-quality services for all your mortgage requirements. A combination of various loan programs and low rates, we cover the areas of Houston, Austin, Dallas, The Woodlands, Tomball, San Antonio, Spring, and Texas. Our highly skilled mortgage experts are backed by many years in the industry and we work one-on-one with our clients to ensure they receive a home loan that is tailored to their expectations and requirements. Regardless of whether this is the first time you are buying a home, you are looking to refinance your existing loan, consolidating debt, or you are buying the home of your dreams, we will help to get you the perfect loan program at a low rate.

We have a goal to build up lasting relationships with our clients so that we can carry on providing exceptional services for years into the future. Unlike other mortgage companies across the nation, we maintain confidentiality when it comes to your information. We are a reliable and trusted name within the lending industry.

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.

Types Of Texas Mortgages: Which One Is Perfect For You?

All You Need To Know About The Types Of Mortgages In Texas

Did you realize that there are various types of mortgages available? In this article, we will discuss the most common options along with the benefits and drawbacks to each.

When it comes to purchasing a house, you may think the only option is a fixed-rate mortgage for 30 years. However, this is not true as there are various mortgage options available. Below is a basic discussion of the 16 types of mortgages – some very common and others quite rare.

1. The Fixed-Rate Mortgage

The fixed-rate mortgage is potentially the most popular and commonly used alternative. Having a set interest rate means one has predictable monthly payments. The payment schedule can be spread over a term ranging from 15 to 30 years. It should be noted that shorter terms are gaining popularity.

  • 30-Year Mortgage. Approximately 90% of all homebuyers in 2016 opted for the standard fixed-rate, 30-year mortgage. A longer repayment period makes the payments more affordable and can help buyers organize more affordable monthly payments for expensive properties.
  • 20-Year Mortgage. Similar to the 30-year mortgage option, the 20-year mortgage offers fixed rates resulting in consistent monthly payments. Most homebuyers opt to split the difference between short and long terms allowing people to pay off their mortgage sooner. Typically, the 20-year mortgage option has a lower interest rate than the popular 30-year mortgage.
  • 15-Year Mortgage. Contrary to popular belief, the payment schedule for a 15-year mortgage is not more costly than the rates for a 30-year mortgage. This type of mortgage offers lower interest rates making them affordable as a short-term mortgage. You would be able to pay off the mortgage in a shorter period without an increase in interest rates.

2. The Adjustable-Rate Mortgage (ARM)

The adjustable-rate mortgage allows for fluctuations in the interest rate. The interest rate will differ according to the type of loan you choose. If interest rates are decreasing, the ARM allows homebuyers to take advantage of this without any refinancing. However, if the interest rates rise, ARMs are surprisingly expensive asking for high payments.

  • The Variable Rate Mortgage. Variable-rate mortgages are merely another form of adjustable-rate mortgages. The common factor is that variable-rate mortgages have an adjustment in the rates throughout the loan term. Rates will often change according to the third party’s index rate and the lender’s margin. The rates are adjusted on a set payment schedule regardless of whether payments are made every month, every year or on a longer period. It also caps the maximum amount of interest you will need to pay.
  • The Hybrid ARM. A hybrid adjustable-rate mortgage involves a fixed initial rate for a set period of time. The most common hybrids include three years of fixed interest followed by adjustable interest rates. The 5/1 option is similar to the 3/1 option with the difference being a five-year introduction period instead of three years.
  • The Option ARM. The option adjustable-rate mortgage option provides borrowers a four monthly payment alterative. The mortgage includes a set minimum payment amount, a 15-year or 30-year amortizing payment schedule, and interest-only payments. In most cases, the option ARM is utilized to achieve a much larger loan than the borrower would typically qualify for.

3. The Balloon Mortgage

Balloon mortgages are paid over a short term, mostly 10 years or less. For the majority of the set term, the balloon mortgage requires low payments and sometimes interest only. At the end of the set term, the full balance of the loan needs to be paid. This can place borrowers in a risky position.

4. The Interest-Only Mortgage

The interest-only mortgage offers borrowers an alternative for a lower monthly repayment schedule over a set period. After this, the individual will need to start paying the principal amount. Balloon mortgages are technically a form of interest-only mortgages; however, it does not require any lump sum payments of principal amounts.

Instead of asking for a lump sum payment, the mortgage allows borrowers to pay interest-only payments over a set period. After this, the individual is required to “make up for lost time” through the payment of more than the principal amount using a standard fixed-rate mortgage schedule.

5. The Reverse Mortgage

The reverse mortgage option is reserved for senior citizens exclusively. Reverse mortgages offer homeowners access to the property’s equity in a loan which can be set up for monthly repayments, withdrawn in a lump sum, or receiving a line of credit.

The reverse mortgage is only available when you need to leave the property. If you leave, even if it is before death, you are required to repay the mortgage amount using the proceeds of the loan. This can reduce the equity on which most seniors depend to fund long-term expenses.

6. The Combination Mortgage

A combination mortgage is useful to avoid any private mortgage insurance or PMI if you cannot pay 20% of the property value. On average, borrowers take out a mortgage for approximately 80% of the property value with another 20% payment on the home value. This is known as an 80/20 combination mortgage loan.

In many cases, the combination mortgage will be more costly than others regarding interest rates. However, if you review mortgage options, the PMI is also highly costly. If you are able to pay off the high-rate 20% quickly, then you can emerge with a beneficial combination mortgage.

7. The Government-Backed Mortgage

To encourage people to purchase homes, the federal government offers borrowers mortgages backed by government authorities. Should the borrower default on the mortgage, a government-backed mortgage provides coverage of the lender’s losses from the government entity.

  • The FHA Loan. Federal Housing Administration can back loans and are ideal for first-time homeowners or people with a bad credit score. This type of loan is commonly used for cooperative housing projects, single-family homes, some multi-family houses, and condominiums.
  • The USDA Loan. Rural homeownership is highly encouraged using this loan because the US Department of Agriculture offers a specialized mortgage option. The payment schedule is low for people purchasing homes in rural areas.
  • The VA Loan. The US Department for Veterans Affairs backs the zero-down mortgage option for people in active duty, on the national guard, a reserve for government service, and veteran members of all armed forces.
  • The Indian Home Loan Guarantee. HUD mortgages are available to people of Native American descent who are earning a low income. This also includes Hawaiians and Native Alaskans.
  • The State And Local Programs. If you have problems paying a mortgage down payment or have a bad credit score, then it is recommended that you review the different state and local government programs.

8. The Second Mortgage

If you own a house and have equity built on it, you can opt for the home equity loan (also known as a second mortgage). This is another type of mortgage loan secured by the house’s current equity. A further mortgage option is the home equity line of credit. This alternative is a revolving mortgage loan depends on the property’s equity.

Final Words On The Matter

The type of mortgage chosen is a significant consideration when buying a house. The good news is you have various mortgage options available. In most cases, it is recommended that you focus on the fees and interest rates when comparing loans.

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!