2019 Minimum Mortgage Requirements – Part 1

mortgage ratesInterest rates are climbing steadily and it would only make sense if you are considering buying a home sooner than later. The next thing that you are probably thinking about is if you could qualify for that loan at current mortgage rates. Although credit standards have lowered a little bit over the past ten years, there are still minimum standards that you should meet if you’re aiming for a specific mortgage loan.  Good debt-to-income ratio, stellar credit score, and some financial documents are needed to secure a home loan. However, the requirements vary greatly depending on the loan that you’re applying for.

FHA home loan requirements

If you’re looking for the easiest loan you can get, you should consider getting a mortgage through the Federal Housing Administration. FHA-approved lenders offer more manageable rates due to the fact that the FHA provides mortgage insurance. First-time home buyers can take advantage of an FHA home loan due to its lower down payment requirements compared to the 20% down payment on typical home purchases.

Here are the minimum requirements to get an FHA loan approved:

Down payment – for applicants with a 580 credit score, there’s a 3.5% minimum down payment. For people with a credit score somewhere in between 500-579, a 10% down payment is required. The down payment can either come from various sources including payment assistance programs, a gift from a relative, and from personal bank accounts.

Debt-to-income ratio – the current front end ratio is 31% while the back end ratio is 43%. The ratios are dictated by the Department of Housing and Urban Development.

Residence – the property involved must be your primary residence for at least one year.

Employment – the applicant must have stable income and can provide proof of income for the past two years. Any changes in employment must also be documented.

Mortgage insurance – you can choose between two mortgage insurance premiums for FHA loans, upfront and monthly.

Requirements for conventional loans

Usually, the conventional loans (15 and 30-year terms) have more stringent requirements compared to an FHA loan. However, it does offer some leeway and long-term benefits i.e. lower mortgage rates.

Down payment – down payments for conventional loans can be as low as 3%, however, mortgage insurance will be necessary. On the other hand, some of the low down payment programs may include limits.

Mortgage insurance – if you can afford to pay a 20% down payment, you won’t need to pay for private mortgage insurance.

Credit score – the credit scores required for conventional loans are higher, starting at 620. Some lenders may have higher requirements at 640. Better credit scores open the door for more favorable interest rates and lower mortgage insurance payments.

Employment – your overall employment history will be checked, highlighting the last two years.

Debt-to-income ratio – conventional lenders allow higher DTIs of up to 50%. However, higher debt ratios mean a higher credit score requirement.

Veterans Affairs loan requirements

The Veterans Affairs department offers mortgages to military personnel who are currently in service, reservists, as well as veterans including their families. Lenders can offer more favorable mortgage interest rates since the VA guarantees a big portion of the loan. The requirements are as follow:

COE – some specific documents and identification are required. Also, applicants must also have a VA loan certificate of eligibility. Without this, applicants will not be eligible for the loan.

Down payment – no down payment is required for VA loans.

Mortgage insurance – there are no PMI fees involved in VA loans. However, there is a funding fee that is charged at the closing of the loan, normally on top of the loaned amount.

Credit score – there is not required credit score for a VA loan. However, lenders often require applicants to have a credit score of at least 620.

Income – for VA loan applicants, there’s no income threshold. However, the applicant must be able to provide proof of steady income.

Debt-to-income ratio – applicants for VA loans can have higher DTIs, however, it is recommended that it does not go beyond 41%.

Want to buy a house at the lowest mortgage rates possible? Call MB Mortgage Pros today.

MB Mortgage Pros
630 Chestnut Road
Myrtle Beach, SC 29572

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