Quick Mortgage 101
With several mortgage programs to choose from, this can be a difficult task at hand for anyone who isn’t too familiar with the difference between each one. Varying from government endorsed programs to conventional, you will find that one of the two types is best suitable for you or what you may only be able to get qualified for.
Basics of a Mortgage Pre-Approval
Getting pre-approved for a mortgage loan would be one of the many steps to buying a home, unless you are paying with cash in full. When you don’t have the cash to pay in full, you are then required to get approved for a mortgage loan and a minimum down payment may be required from you as well. The down payment is a certain percentage of the home’s market value.
A part of the pre-approval process, you can expect for a run through in your credit history, score, and report. This may determine how much down payment is required from you if you did get approved for the loan. This is why maintaining a healthy credit or fixing a damaged credit prior to large investments such as financing a home or a car is so important. Depending on the mortgage loan program, credit score and history requirements may vary as well from 620 to the perfect score.
Mortgage Programs Available Today
Below is a list of the most commonly used mortgage programs that are available today. You may find that not all of them will fit your particular scenario. That is why it is a good idea to get to know their overall requirements and benefits before making your final decision to get approved for one.
- FHA Home Loans
- Renovation Home Loans
- USDA Home Loans
- VA Guaranteed Home Loans
- Reverse Mortgage Loans
Debt-to-Income Ratio
One of the other determining factors on a mortgage loan approval is a borrower’s debt-to-income ratio also known as DTI. Your DTI is a comparison between your monthly income and your monthly financial obligations and/or household expenses. This is not just important for the lender to take into account, but for you as the borrower as well. This will help determine whether or not a borrower can afford to make their monthly mortgage payment each month, since you don’t want to end up with a default on your future mortgage and neither does the lender. Not just being able to afford a mortgage, but being able to live comfortably with a mortgage payment is truly important and is a huge investment.
Employment History
When a lenders look at a borrower’s employment history, they are looking for a stable source of income. Some mortgage lenders may even require that the borrower work at their jobs for a minimum of at least 2 years at their current job to be considered for a mortgage loan. Keep in mind however, requirements may vary.
Mortgage Down Payment
Knowing how much of a down payment you are willing to put down will give you a good idea of what mortgage program you are even interested in applying for. Just like the several requirements that each program expects for borrowers to meet, a certain amount of down payment is usually required ranging anywhere from 0% to 20%. For first-time homebuyers, there may be a down payment assistance program that you may qualify for as well, so don’t forget to ask this question if it fits your scenario.
