Do you anticipate a home purchase soon? That’s an excellent idea! Buying a real estate is a unique way to invest your hard-earned money. But can you afford to buy a house of your own finally?
For most people, a home purchase is only possible with the help of a home loan. But what do you need to qualify for a mortgage?
One of the most affordable mortgages out there is Fha Loans Arlington. Such mortgage type can help you finance a home purchase with a reduced down payment or with limited credit. If you’re interested about learning about the things you need to qualify for Fha Loans Arlington, then keep on reading.
A steady source of income
A fundamental requirement for any borrower is for you to provide a verifiable income. Mortgage lenders would want to make sure you can pay for the loan by providing at least two years worth of proof of income and tax returns. If your employment history shows you’ve been job-hopping and can’t stay in a company for at least 1-2 years, this can jeopardize your ability to qualify for the loan.
At least 3.5% down payment
In an FHA mortgage, the minimum down payment requirement is 3.5% of the home’s purchase price. For example, you wish to buy a house that is worth $250,000.00. To get approved for an FHA loan, you’ll need about $8,750.00 down payment. However, there are times when you’ll need 10% down payment, depending on your credit score.
500-580 FICO Score
Your mortgage lender will gauge how responsible you are at paying your credits by assessing your FICO score and credit history. Most will require a minimum of 580 credit score. This makes you eligible to pay 3.5% down payment. Others will accept your loan application even if you have between 500-570 credit score. However, you will need to have 10% down payment for having a low score. This is why it is advisable to improve your score and credit history before even applying for a home loan.
DTI ratio of 31% and 43%
Mortgage lenders will check if you can comfortably pay your mortgage on top of your existing debts. One can do this by evaluation of your DTI ratio. Your Debt-To-Income is your total debt figure divided by your total monthly income. For example, your monthly earning is $5,000.00, while your monthly debt costs $1,500.00 a month. Your DTI ratio is 30%. For an FHA loan, your maximum DTI ratio needs to be 31% monthly mortgage and 43% total recurring debts.
When buying any real estate property with an FHA loan, the house needs to be your primary residence. This means you need to occupy the home you will buy with the FHA mortgage for the majority of the year.
FHA mortgage allows home purchase financing for low down payments and credit scores. However, unlike conventional home loans, you are required to pay for upfront and annual mortgage insurance premium. This will protect your lender from losses in case you fail to pay off the loan.
Recommended Read: Comparing Private Mortgage Insurance vs. Mortgage Insurance Premium