The tide is turning again for interested home buyers, even if it is their first property purchase. In fact, the conditions are still good for them, so long as they are aware of the requirements that will allow them to finance their purchase.
Home Loan Guidelines For First-time Buyers
In terms of requirements and mortgage qualifications, there is not much of a difference between first-time and repeat property buyers. However, in some cities, there are programs that make it easier and less expensive for them to become homeowners as opposed to renters. Here is a rundown on the requirements first-time home buyers need to accomplish.
1. Down Payment Requirements
If you look for a home loan from a private institution, you will need to put down at least 3% down payment. On the other hand, loans from the Federal Housing Administration (or FHA) allow those eligible to put down a 3.5% down payment. To be eligible, a credit score of at least 580 will be required.
In comparison, VA loans (which are available for military members and veterans) will offer 100% financing. This means first-time buyers will not be required to pay a down payment if they have a VA-guaranteed loan. This is a huge help for wanna-be homeowners who do not have a lot of savings to meet the down payment requirements.
2. Credit Score Requirements
These three digits can greatly affect your mortgage or loan conditions. It shows how much money you have borrowed and paid back in the past. It is based on other loans, credit cards, and other ways to borrow money.
The first thing to do when you decide to buy a home is to check your credit score . This is because all banks or loan providers look for a specific credit score before they sign them up for a loan. Conventional loans will look for about a score of 600 or higher (the FICO scale goes from 300 to 850) but the FHA will look that the home buyer has a score of at least 580 to receive the 3.5$ down payment condition.
Much like with the other requirements, lenders are becoming more lenient when it comes to debt-to-income ratios. Thanks to some policy changes by Freddie Mac and Fannie Mae, banks and other lenders allow higher levels of debt, especially when compared to 2 or 3 years ago. Because first-time homebuyers might still owe some money on car mortgages or student loans, this change is much needed.
Getting a home loan is presently still relatively easy, which is why wanna-be homeowners should start their search for their dream home before this changes. In fact, if you have always dreamt of having your own home, then now is the right time.