What does it take to qualify for a mortgage? It might be less than you’d think.
It’s come to my attention recently that many homebuyers think it’s much more difficult to qualify for a mortgage than it actually is. Granted, back in 2009, there were some pretty strict requirements put into place for purchasing a home, and many of those requirements are still in place today. Those seemed especially strict considering that, from 2004 to 2005, if you could fog a mirror, you could get a loan.
Obviously, those requirements created a big change in the loan process, but it’s not as difficult as most people would think. A recent survey from Fannie Mae found that most borrowers thought they needed a minimum credit score of 650 to purchase a home—this is simply not the case. To qualify for a loan, you actually only need a credit score of 580. There are some extra requirements that may be put into place, but it’s still possible to get a mortgage.
Now, the survey also found that most borrowers thought that, at a minimum, a 10% down payment was required to buy a home, but that’s also untrue. In addition to a 3%-down conventional loan, you can also get a 3.5%-down FHA loan. There are even some grant programs that allow you to put as little as 1% down on a home. Of course, don’t forget the VA loans, which allow veterans of the Armed Forces to take advantage of 0%-down requirements. There are really a lot of great options for people to be able to put down less than 10%.
If you do put 20% down, you aren’t required to pay for monthly mortgage insurance, but sometimes the amount and the rate at which people can save is not the same, and interest rates and appreciation can go up higher and faster than people can save.
Many people also believe that they simply have too much debt to buy a home. You can actually have a maximum of 50% to 56% of debt, depending on the loan program you utilize—and that’s including your mortgage payment. Obviously, it’s great to have no debt as you begin the home-buying process, but this isn’t always practical for everyone, especially those with a lot of student loans.
If you want to find out more about home loan programs and their requirements, if you want to talk about whether or not it’s a good time to purchase a home, or if you have any real estate questions at all, feel free to give us a call. We’ll be happy to look at this information to see if you can qualify for a loan to buy your next home.