Applying for a Home Loan for the First Time? Understand the Requirements

1. Applying for a Home Loan for the First Time? Understand the Requirements Buying a home is a once-in-a-lifetime experience for many people. It is a challenge that can be tackled with discipline, patience, and attention to detail. Over the last couple of years, the mortgage industry has faced a substantial change. However, mortgage requirements and qualifications are the same for both first-time and repeat homebuyers. Here is an overview of the minimum mortgage requirement for those applying for a home loan for the first time. Most of the below-mentioned qualification standards apply to all kinds of buyers. Down Payment If you are planning to use the Federal Housing Administration (FHA) home loan, you will have to make a down payment of 3.5% of the purchase price or appraised value. So you must have a credit score of 580 or higher to get approved for this down payment. For a conventional home loan, you need to make a down payment of at least 3% of the appraised value or purchase price. Fannie Mae and Freddie Mac, the two government-sponsored corporations, buy mortgage loans with up to 97% of the home value. VA loans allow first time homebuyers to get 100% financing at zero down payment. The eligible borrowers like veterans and military members can get a huge benefit from this particular program. Credit Score It is your credit score that gives the lenders an insight on how you have rented and repaid the amount earlier. The information contained in a credit report history defines the credit score. For a conventional loan, mortgage lenders prefer a credit score of 600 or higher of first time homebuyers. When it comes to FHA loans, first time homebuyers will have to meet the mortgage requirements established by the Department of Housing and Urban

2. Development (HUD). Here, buyers need a credit score of at least 500 to be eligible for the FHA loan program and to qualify for 3.5% down payment, borrowers need a score of 580 or above. Debt-to-Income Ratio Since Fannie Mae and Freddie Mac made changes in the policy, lenders have started allowing higher debt levels than earlier. The increase in debt ratio limit for the loans Fannie Mae can purchase will definitely help first time homebuyers who already have significant debts in qualifying for the mortgage loans. If you are applying for a home loan for the first time, this information on mortgage requirement for down payment, credit score, and the debt-to-income ratio will help ease the home buying process. Source: https://medium.com/@rochesterneighborworks/applying-for-a-home-loan-for- the-first-time-understand-the-requirements-16129803f475 NeighborWorks® Rochester nwrochester.org 585-325-4170