There’s a general feeling in the market that in order to get a mortgage now, a person has to have a credit score over 700 credit score; a very high income and a large down payment. This can be difficult since the economy is still recovering so that high paying jobs are hard to come by. Also, due to the high cost of living, it is hard to save a lot of money in order to buy a house. But none of that is necessary. So long as you have a job and a little money saved or available to use from some source, you can buy a home!
For example, on a Fannie Mae or a Freddie Mac loan you can put down as little as 5%, and on an FHA loan, you can put down as little as 3.5%. In addition, on an FHA loan, you can even get that 3.5% as a gift from a family member, as an advance from your employer and in various other ways. With respect to credit, you don’t need credit scores over 700 to qualify for a loan either. On a Fannie Mae and a Freddie Mac loan, you want to have at least a 660 credit score. On an FHA loan, you can qualify for standard interest rates with a credit score as low as 640. You can even get an FHA loan, with slightly higher interest rates with credit scores as low as 580.
As for income, Fannie Mae and Freddie Mac are letting people spend up to 45% of their gross monthly income on their mortgage and debt payments. The mortgage part consists of principal and interest on the mortgage; real estate taxes; mortgage insurance (if applicable) and your home insurance. The other debt payments include car loans, student loans, credit cards, alimony and child support and any other debt that is payable monthly. On an FHA loan, we can lend to people who have debt to income ratios as high as 55%. That means 55% of your total gross income can be spent on your debt.
So, if you have a good job, are able to come up with some money for a down payment, you likely will be able to buy a home. Even if you had a bankruptcy, foreclosure or short sale in the past few years you may be eligible. If you are dreaming of owning your own home, the best thing to do is to contact a reputable mortgage lender to discuss your financial situation. They will be able to tell you if you can qualify for a loan now or, if not what you may need to do in the near future to make that happen. And, as you can probably imagine, if you do not know a good mortgage lender, I will be happy to refer you to one of the best! 🙂