Home Purchase Loans

Home Purchase Loans

Qualifying For Home Purchase Loans

A Home Purchase is probably the biggest investment for most people. Home buyers, especially first time home buyers are often excited and nervous at the same time when purchasing a new home and qualifying for home purchase loans. There are a lot of considerations to consider when purchasing a home. Gustan Cho Associates is a one stop shop mortgage and real estate information resource center where our goal is to educate and offer the opinions of our expert writers who are real estate and mortgage industry professionals who are experts in their fields. There are various types of home purchase loans for home buyers.

Types Of Home Purchase Loans

There are various types of home purchase loans. The list below briefly explains the type of loan program available today:

  1. FHA Loans: FHA Loans are by far the most popular home loans for owner occupied home buyers. You can qualify for a 3.5% down payment FHA Loan with a minimum credit score of 580 FICO. You can have outstanding collections and charge off accounts and can qualify for a FHA Loan without having to pay them off.
  2. VA Loans: VA Loans is probably the best mortgage loan program available today, however, VA Loans is only available to veterans of the United States Armed Services with a Certificate Of Eligibility in good standings. VA Loans do not require any down payment and there is no mortgage insurance premium required.
  3. USDA Loans: USDA Loans is limited to areas throughout the country that is designed as rural by the Department Of Agriculture. USDA Loans do not require any down payment on a home purchase, however, USDA does have a maximum household income cap in order to qualify for a USDA Loan.
  4. Conventional Loans: Conventional Loans are also called conforming loans because they need to conform to Fannie Mae and/or Freddie Mac Lending Guidelines. Minimum credit scores required to qualify for Conventional Loans is 620 FICO. Those needing a second home and/or investment home loan needs to go with a Conventional Loan because FHA, VA, and USDA Loans are only for owner occupied primary mortgage loans and are not available for second home financing or investment property loans.
  5. Jumbo Mortgages : Any mortgage loans that is higher than the conforming loan limit of $417,000 is considered a Jumbo Loan. Jumbo Mortgages have tougher lending requirements than other loan programs because they are considered higher risk loans due the larger loan amounts and because higher end properties take longer to sell in the event if the lender forecloses on the property.

Qualifying For Home Loan Loans

Qualifying for home purchase loans is not as difficult as many folks think it is. The first professional advice home buyers need to seek when considering buying a home is consulting with a mortgage lender. Most home buyers think of going to their local bank for a mortgage loan. However, most banks have tougher mortgage lending requirements than other types of mortgage lenders. If you have lower credit scores, prior bad credit, or higher debt to income ratios, you may want to consult with a mortgage lender with no mortgage lender overlays. Mortgage lender overlays are mortgage lending guidelines that surpass the federal minimum mortgage lending guidelines.For example, minimum credit scores on FHA Loans is 580 FICO.  Many FHA approved mortgage lenders have their own investor overlays.  Majority of FHA lender will not touch a borrower who has credit scores of under 620 FICO.  This higher requirement on credit scores by a lender is called a lender overlay on credit scores. Many home buyers who get turned down by their local bank due to not meeting the bank’s minimum credit score requirements are not told by the loan officer at the bank that they do not qualify at the bank but may qualify at other mortgage companies.  There are many potential home buyers who just give up shopping for a mortgage because they think just because they got denied by their local bank, they do not qualify elsewhere.

A large percentage of mortgage loan borrowers who have credit scores under 620 FICO may not qualify for a mortgage loan at banks and other mortgage companies who have overlays, but the fact is that they will qualify for a mortgage with a mortgage lender who does not have lender overlays on credit scores.

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