Can I get a mortgage?
The first step in buying a home is to get preapproved for a mortgage.
The mortgage lender will analyze your annual income, your credit history,
and credit score. Lenders use a calculation called
debt to income to estimate
the ideal mortgage payment.
Debt to income is a comparison between your monthly income and monthly
debts. After providing the mortgage lender with your financial information,
the lender will decide which mortgage loan is best suited for you. There
are four popular home loans available, FHA, VA, USDA, and Conventional
mortgages. See below
The FHA loan is extremely popular due to it low down payment of 3.5%
and low credit score requirements.
The VA loan is a great way for a cash strapped veteran to purchase a
home. The veteran loan does not require a down payment . . . 100% financing
. . . and the seller is permitted to pay all closing costs on behalf
of the veteran. The USDA loan does not require a down payment and the
seller is permitted to pay a percentage of the buyer’s closing costs.
If you intend on making a sizable down payment, take a look at the conventional
Are you a first time home buyer?
Get prepared for homeownership with these home buying tips -
Four tips for home buyers
What are closing costs? What is a good faith estimate
Closing costs are required home buying expenses. The good faith estimate
is the form that lists the home buying costs.
Questions About Loan Pre Approval
► Do I qualify for a home loan
Banks and mortgage companies require two years of continuous
employment, although there are some exceptions to the
two year (24 month) rule. Most mortgage lenders desire
a credit score of 620 or greater, however, once again
there are exceptions. For example, the FHA home loan
will accept a 580 credit score. The mortgage programs
require a balance between monthly income and monthly
debt obligations. Lenders use a formula called debt
to income to help determine the ideal loan amount and
monthly mortgage payment. The only way to determine
whether you will qualify for a mortgage is to speak
to a mortgage loan officer to determine whether you
qualify for a home loan.
► How long is a mortgage pre
approval good for?
Most lenders will tell you that their pre approval is
good for 60 days, but the pre approval is dependent
on maintaining the status quo for income, credit, and
employment that was provided to the lender. Taking on
more debt or reducing cash assets can nullify the pre
approval. Don't quit your job or make any changes
to your employment. In short, the pre approval can extend
much further than 60 days provided no changes have occurred
► How long does mortgage pre
Pre approval can take as little as 30 minutes, but could
stretch out weeks if you do not have all your information
ready for the loan officer. The mortgage lender will
want to see your most paystub or ask you to recite the
information on the paystub. He or she may want to see
(or hear) your W-2 earnings from last year. Are you
receiving or paying child support or alimony? The lender
needs all information relating to monthly income and
monthly debt obligations. The self employed, rental,
and non-taxable income can slow down the pre approval.
Prior to speaking to a loan officer for pre approval
or pre qualification, have your tax returns for the
two previous years, your most recent paystub and bank
statements and any other savings account(s). Including,
401K and deferred retirement accounts.
► Does a pre approval letter
guarantee a loan?
When a lender provides you with a pre approval letter,
he or she is basing the pre approval on a hypothetical
sale. The lender is estimating the sales price, real
estate taxes and homeowners insurance based on your
financial information; therefore, no pre approval can
► Does getting pre approval hurt
The credit inquiry will have a nominal impact, if any.
► How do I get pre approved for
a mortgage loan?
Any of the lenders below will be happy to start the
pre approval process.
What is an FHA home loan?
loans are "insured" by the Federal Government. The
benefits of FHA loans include low down payment, lower credit
score requirements and allowable seller paid closing costs.
What is a Conventional Loan?
Conventional mortgages are loans that are not guaranteed
or insured by any Federal agency, specifically, the Federal
Housing Administration (FHA loans), United States Department
of Agriculture (USDA loans) and Veterans Administration (VA
Conventional mortgages are also known as "conforming"
loans because they "conform" to the maximum lending
limit and underwriting guidelines of Fannie Mae and Freddie
Fannie Mae lowers the down payment to 3% -
What is a USDA home loan?
This USDA mortgage
is designed for low to moderate income home buyers who purchase
a home in eligible rural areas. The USDA home loan provides
100% financing for eligible applicants. That’s right . . . no
down payment! There are no purchase price limits and the seller
can pay a percentage of the buyer’s closing costs. The loan
program also permits less than perfect credit. The USDA home
loan is administered by the US Department of Agriculture.
VA home loan
The Veteran home loan does not require a down payment -
That's right, 100% financing! -
And, the seller is permitted to pay all reasonable closing costs
on behalf of the veteran.