Ready to take the plunge into purchasing your very own home? Whether you’re tired of renting or you’re just ready to take the leap of owning a home, there are things you’ll want to know about qualifying for a home loan. For one, how do you qualify? What does the process look like and what’s involved? Today, we’re going to take a look at what qualifying for a home loan entails and how to make things work for you. Are you ready?
How Much of a Down Payment Will I Need?
If you’re looking at that question and freaking out thinking “OH NO! There’s that big bad word!!” Stop right there because It’s not as big of a deal as you think. The days of huge 20% down payments are over. Now, there are a number of mortgages that have very small down payments or even NO DOWN PAYMENT AT ALL!
If you think you can’t qualify just because you’re not a first time home buyer, don’t panic! Due to the flexible requirements, FHA loans have become the most popular loan type. To help you a little bit, we’ve compiled some guidelines for you to work off of:
Down payment guidelines for loan types:
VA Loans – No down payment
USDA Loans – No down payment
FHA loans – 3.5% down with a 580 credit score (10% down with a score between 500-579) 203k Loans – 3.5% down
Conventional 97 – 3% down
Conventional Loans – 5%-20% down
Now that you know your average down payment, use this handy mortgage calculator to learn more:
Let’s Talk Credit Score
Do you have good credit? Bad credit? No credit? Your credit score is going to be a deciding factor in whether or not you qualify for a mortgage. There are set minimum qualifying credit score requirements for each loan program. However, lenders don’t have to follow them and will typically set their own credit score guidelines. Keep this in mind when you’re looking at your credit report. It’s not the end of the world if you have bad credit! There are ways around it and you can improve it in time.
Here’s a guide on qualifying credit scores:
VA Loans – 620 credit score (Some lenders may be able to approve a 580+ score)
USDA Loans – 620 credit score
FHA loans – 580 credit score
203k Loans – 640 credit score
Conventional 97 – 620 credit score
Conventional Loans – 640 credit score
Qualifying Through Income
In order to qualify for a home loan, you are going to have to provide proof that you can make the payments and afford the home you’re looking into purchasing with the mortgage. You will most likely need to provide at least two years of documented income with the same company or at least in the same industry in order to qualify.
We hope we’ve helped to sort out some of your questions and now you can continue on the path to success!