New Purchase

Before you start looking for a new home, you need to know what you can afford. You could be turned down multiple times, and you may be bidding on properties that you won’t even be able to buy. You should know which banks are likely to accept your application before you start looking for a home, because it will help you to determine your price range.

What Determines Your Eligibility for a Home Loan

Income is a major factor in determining how much of a mortgage payment you can afford, but there are other factors that are taken into account as well. Taxes, maintenance costs, insurance, and other expenses must also be considered. Many mortgage lenders don’t want borrowers to have a payment that exceeds a certain percentage of their monthly income. But if you have excellent credit, they may allow a payment to exceed 44% of your income.

Mortgage lenders also look at your credit history, so they’ll pull a report from the major credit bureaus. Not only can they look at your credit information, but they can also pull your FICO score. All of this information will help them to determine your eligibility, but they’ll also look at the history of your bill payments as well as the number of debts you have in relation to your income.

A higher credit score will make it easier to qualify for a mortgage. But if you’re always late on your bills, then it will be lower. The lender could reject your application, ask for a larger down payment, or charge a higher interest rate to reduce their financial risk.

The Prequalification Process for Home Loans

After you have done all the preliminaries and have prepared a financial statement, you can ask the lender for a prequalification letter. It will tell you the likelihood of getting approved for a loan based on your credit history and monthly income. It will also let you know how much you should be able to borrow, as well as the required amount for a down payment. But in some cases, a prequalification letter won’t be enough.

Many borrowers want to be preapproved for a loan, which will guarantee a specific amount. These types of home loans are more binding, because the lender has already done a credit check and evaluated your current financial situation. They’ll issue the loan after they have done an appraisal of the property, the contract has been signed, and the title has been issued.

Recent Changes to the FHA Guidelines

The U.S. Department of Housing and Urban Development helps people to get homes loans with bad credit, which are backed by the Federal Housing Administration. There are many benefits to these types of home loans (such as lower down payments), but you have to follow their guidelines if you want to get approved. Some of them are with regard to down payments, income levels, credit rating, and the condition of the property you’re currently buying. Not much has changed from the previous year, but there are some significant areas of which you should be aware.

Some of the changes to the FHA guidelines include:

• Down Payments — According to the Department of Housing and Urban Development, the maximum amount of financing you can get for your home is 96.5% of its cost, so you only have to make a down payment for 3.5% of the purchase price. However, there are certain criteria for determining your eligibility. If you have a credit score of at least 580, you can get the maximum amount of financing and the lowest down payment. But if it’s between 500 and 579, you can only get up to 90% financing (which will require a 10% down payment).
• Income — Before you can qualify for an FHA loan, you must give provide documentation with regard to your income and employment history, and lenders must verify both before they can approve it. They must also show that the income is likely to stay consistent over the next three years, and several factors are taken into consideration — some of which include overtime pay, seasonal employment, and changes in earnings over a two-year period.
• Debt-to-Income Ratio — The Department of Housing and Urban Development requires the mortgage payment to not be above 31% of your monthly income, which is the standard debt-to-income ratio. Lenders also look at your other monthly bills, so they can adjust your loan amount accordingly. This combined total can’t be above 43% of your monthly income, but they’ll accept someone with a larger percentage in some cases.
• Loan Limits — The Department of Housing and Urban Development raised the loan limits in both 2018 and 2019. Last year, the maximum loan amount was $679,650. This year, they raised the limit to $726,525 in high-cost areas and $314,827 in low-cost areas. But the loan limits vary from one county to another. Some parts of Hawaii, Alaska, Guam, and the U. S. Virgin Islands have loan limits that are higher than the specified maximum.
• Property — Any home that you want to finance with an FHA loan must meet certain safety requirements. Appraisers have to look at the home for certain hazards — such as paint that’s deteriorating, radioactive materials, and toxic chemicals. They’ll also look at possible structural damage and shifts in the surrounding soil. And if it fails to meet these guidelines, the appraiser must file a report documenting the repairs that the seller is required to make before the loan can be approved.

Be sure to speak a professional for more information.

An Experienced Mortgage Lender in the Coastal Bend!

The mortgage industry is constantly changing, and it takes an expert who stays up-to-date so people get approved for home loans. Many of the changes is with regard to how lenders view credit, and John the Mortgage Man has a program that can help you get the credit score you need. We’re one of the most experienced mortgage lenders in Corpus Christi, Texas, and we’ll walk you through every step.

We’ve been in business for 23 years, and we’ll explain every detail. We have access to more products than most lenders, which will increase your chances of getting approved. We have taken people who couldn’t qualify for a loan, and we have gotten them approved.

If you want to work with one of the best mortgage brokers in South Texas, feel free to reach out to us. We would be happy to speak with you!