Have you wondered "What do I need in order to qualify for a home loan?" or "How much do I need to save to purchase a home?". Both questions are common in Real Estate but the answer depend on the type of loan you want to achieve. Below we explain which loan would fit you best, later detailing what you need to prepare for a loan.
FHA Loan
If you have little savings, a credit score above 550 and you're wanting to purchase a home less than $275,000 then this is the loan for you. (see details below)
Conventional Loan
If your credit score is above 620, you have some savings, you want to buy a home over $275K and/or you don't want to pay Mortgage Insurance Premium (MIP) then this loan is perfect for you. (see details below)
Unconventional Loan
If you're self-employed, deposit cash vs. business checks, deposit cash in your personal account vs. W2/1099, have a lower credit score, have a lot of savings but a low credit score then this is the perfect program for you. (see details below)
VA Loan
If you have ever worked for the military then you have the ability to use your VA benefits, including a VA loan. (see details below)
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FHA Loan
If you have little savings, a credit score above 550 and you're wanting to purchase a home less than $275,000 then this is the loan for you.
Minimum criteria:
1. Downpayment: 3.5% of the purchase price
2. Appraiser cost: $300 (average)
3. Inspection cost: $300 (average)
4. Credit Score: 550+ (most lenders want 620)
5. Debt to Income Ratio: 43% (a lender would tell you yours)
6. Employed for one year and receive a W2 OR self-employed for two years
Not having closing costs puts you at a disadvantage and is harder to buy a home but they can be paid by the seller or your lender. You may also get funds to help pay for the downpayment from any family members or first time home buyer program. (ex: BOND, SHIP, NSP, Teacher Rebate, New Construction Rebate)
Example: $250,000 Sale
Downpayment: $8,750
Appraiser Cost: $300
Inspection Cost: $300
TOTAL: $9,350
Criteria you to meet to be competitive:
1. Downpayment: 3.5% of the purchase price
2. Appraiser cost: $300 (average)
3. Inspection cost: $300 (average)
4. Closing costs: 3% of the purchase price
5. Credit Score: 550+ (most lenders want 620)
6. Debt to Income Ratio: 43% (a lender would tell you yours)
7. Employed for one year and receive a W2 OR self-employed for two years
Example: $250,000 Sale
Downpayment: $8,750
Appraiser Cost: $300
Inspection Cost: $300
Closing Cost: $7,500
TOTAL: $16,850
Having the ability to pay for your closing costs gives you a large advantage over others and give you a better chance of obtaining the home you really want.
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Conventional Loan
If your credit score is above 620, you have some savings, you want to buy a home over $275K and/or you don't want to pay Mortgage Insurance Premium (MIP) then this loan is perfect for you.
Minimum criteria:
1. Downpayment: 5% - 20% of the purchase price
2. Appraiser cost: $300 (average)
3. Inspection cost: $300 (average)
4. Closing costs: 3% of the purchase price
5. Credit Score: 620+
6. Debt to Income Ratio: 43% - 50% (depending on your lender)
6. Employed for one year and receive a W2 OR self-employed for two years
Example: $250,000 Sale
Downpayment: $12,500
Appraiser Cost: $300
Inspection Cost: $300
Closing Cost: $7,500
TOTAL: $20,600
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Unconventional Loan
If you're self-employed, deposit cash vs. business checks, deposit cash in your personal account vs. W2/1099, have a lower credit score, have a lot of savings but a low credit score then this is the perfect program for you.
Minimum criteria:
1. Downpayment: 5% - 20% of the purchase price
2. Appraiser cost: $300 (average)
3. Inspection cost: $300 (average)
4. Closing costs: 3% of the purchase price
5. Credit Score: 620+
6. Debt to Income Ratio: 50% (depending on your lender)
6. Employed for one year and receive a W2 OR self-employed for two years
Example: $250,000 Purchase
Downpayment: $12,500
Appraiser Cost: $300
Inspection Cost: $300
Closing Cost: $7,500
TOTAL: $20,600
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VA Loan
If you have ever worked for the military then you have the ability to use your VA benefits, including a VA loan.
Minimum criteria:
1. Downpayment: None
2. Appraiser cost: $300 (average)
3. Inspection cost: $300 (average)
4. Credit Score: 620+
5. Debt to Income Ratio: 41% (a lender would tell you yours)
6. Employed for one year and receive a W2 OR self-employed for two years
Example: $250,000 Sale
Downpayment: None
Appraiser Cost: $300
Inspection Cost: $300
Closing Cost: $7,500
TOTAL: $8,100
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