How Do I Qualify For A Mortgage Loan And What Are Requirements

This BLOG On How Do I Qualify For A Mortgage Loan And What Are Requirements Was UPDATED On April 27th, 2018

Mortgage lenders do not just lend a home loan to anyone. Lenders need to make sure borrowers qualify not just in making their making their new mortgage payments but borrowers need to qualify and meet minimum mortgage guidelines:

Borrowers need to prepare on how do I qualify for a mortgage loan
Banks, credit unions, mortgage companies are not in the business of owning real estate
They are in the business of lending money and want home as collateral in the event borrowers default on their home loan
They want to make sure that borrowers can repay the mortgage loan
Lenders want to make sure the payments are made in a timely manner
They want to be secure borrowers are able and responsible to pay mortgage payments timely
Besides principal and interests, homeowners owners need to pay the following:
- taxes
- insurance
- homeowners association dues if any

Homeowners need to make sure housing payments will not cause financial stress where they need to make payment arrangements in the future

How Do I Qualify For A Mortgage Loan And Meet Lenders Guidelines

Mortgage lenders require minimum down payments depending on loan program borrowers qualify for .

For conventional loans, there is a 5% minimum down payment requirement
For FHA loans, the minimum down payment required to qualify for a mortgage loan is 3.5%
Lenders require a two year employment history and residential history
Borrowers need to be able to document full time income
Most lenders like to see two years of continuous employment history
Gaps in employments are allowed as long as borrowers have a good letter of explanation of why they were a job hopper or had periods of unemployment

How Do I Qualify For A Mortgage Loan And Meet Minimum Credit Score Requirements

There are minimum credit score requirements:

For example, borrowers who need to qualify for conventional mortgage with a 5% down payment, the minimum credit score required is 620 credit score
To qualify for a 3.5% down payment FHA loan, the minimum credit score required is 580 credit score
If credit scores fall between 500 and 579, the minimum down payment required is 10% down payment
VA Loans do not have minimum down payment requirements and offer 100% down payment
There is no credit score requirements to qualify for VA Loans
USDA Loans require 580 credit scores
HomePath mortgage loans which no longer is available used to require a minimum 660 credit score
Traditional Jumbo mortgages require a minimum credit score of 700
Non-QM Jumbo Loans require 620 credit scores
Condotel and non-warrantable condo loans require a minimum credit score of 680

How Do I Qualify For A Mortgage Loan And Meet Guidelines

Besides qualifying with minimum credit scores, lenders have other credit guidelines.

There are mandatory waiting guidelines after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale
For FHA, VA, USDA loans, there is a mandatory two year waiting period after Chapter 7 Bankruptcy
The waiting period starts from the date of the bankruptcy discharge
VA and FHA Borrowers can qualify for FHA and VA Loans one year into a Chapter 13 Bankruptcy Repayment Plan with Trustee Approval
There is no waiting period after Chapter 13 Bankruptcy discharge date to qualify for VA and FHA Loans
There is a four year waiting period after Chapter 7 bankruptcy to qualify for a conventional loan
There is a three year waiting period to qualify for FHA and USDA loan after foreclosure and/or deed in lieu of foreclosure
The three year waiting period starts from the recorded date of the foreclosure and/or deed in lieu of foreclosure reflected on the recorder of deeds office
Not the date the foreclosure or deed in lieu of foreclosure was initiated
There is a three year waiting period after a short sale on FHA and USDA Loans
The waiting period clock starts from the date of the short sale reflected on the HUD’s settlement statement
There is a two year waiting period after foreclosure, deed in lieu of foreclosure, short sale to qualify for VA Loans

Conforming Loans After Housing Event

There is a 7 year waiting period after a foreclosure to qualify for a conventional loan.

The 7 year waiting period clock starts from the recorded date of the foreclosure that is reflected on public records
There is a four year waiting period after a deed in lieu of foreclosure or short sale to qualify for a conventional loan with 5% down payment
Those with foreclosure included as part of Chapter 7 bankruptcy, the waiting period is four years from Chapter 7 bankruptcy discharge date to qualify for a conventional mortgage loan
Foreclosure, deed in lieu, and/or short sale could have happened after the Chapter 7 Bankruptcy discharged date and does not matter
The mortgage included in the Chapter 7 Bankruptcy cannot have been reaffirmed

Qualifying For A Mortgage Loan With Bad Credit

Mortgage lenders understands that people go through periods of financial hardship and that bad credit is the result when people do go through hardship.

Home Buyers can qualify for a mortgage loan with prior bad credit
However, borrowers cannot have recent bad credit
Borrowers need to have good on time payment history at least for the past 12 months
Recent late payments will most likely disqualify from qualifying for a mortgage loan
Credit report will be reviewed and overall credit history will be evaluated
Here is case scenario how mortgage underwriters view borrowers with a 10 year credit history with perfect credit
- their first 7 years had perfect credit
- but had a streak of bad credit on years 8 and year 9
- but on year 10 they have recovered and re-established credit are in good shape
However, borrowers with habit of paying debts late throughout the whole ten year of credit history and even had recent late payments, collections, and charge offs, they need to re-establish credit for the next 12 months in order for them to qualify for a mortgage loan

Home Buyers who need to qualify for mortgage with a direct lender with no mortgage overlays on government and conventional loans can contact Gustan Cho Associates Mortgage Group at 800-900-8569 or text us for faster response.

Get Pre-Qualified Today By Contacting Us