Mortgage Qualification Requirements
As the economy remains stagnant and unemployment numbers uncertain due to those who left the labor force altogether, mortgage qualification requirements have become more stringent and there seems no end to new mortgage regulations. Mortgage lenders are adding more overlays to their mortgage lending guidelines and some are requiring reserves and lowering the debt to income ratio caps. Others are increasing their minimum credit score requirements while others are asking for more credit tradelines that have been seasoned 24 months versus 12 months. Still other mortgage lenders are requiring rental verification. Rental verification can only be proven by providing the mortgage lender 12 months of cancelled checks. Those who are paying cash to their landlord cannot qualify as having rental verification unless they are renting their apartment or homes from a registered property management company. There are mortgage lenders who are requiring that open unsatisfied collections be paid off. FHA does not require that old open unsatisfied collections be paid off.
Mortgage Qualification Requirements: Down Payment Requirements
The 3% down payment conventional mortgage loan program no longer exists. The minimum down payment requirement for a conventional mortgage loan is 5% down payment. Second homes now require a minimum of 10% down payment and investment homes require a minimum of 20% down payment. There are 15% down payment requirement investment conventional mortgage loan programs available. To avoid mortgage insurance for conventional mortgage loans, the borrower needs to put at least 20% down payment. FHA now requires FHA mortgage insurance premium of 1.35% of the balance of the mortgage loan for the life of the FHA mortgage loan. For those who want to qualify for a 3.5% down payment FHA insured mortgage loan, they need a 580 FICO score. For those with credit scores of 530 FICO and 580 FICO, the minimum down payment required is 10% down payment. Minimum credit scores required to qualify for conventional mortgage loans is 620 FICO. However, conventional mortgage loans are mortgage rate sensitive and the lower your scores are, the higher your mortgage rate will be. Condotel mortgage loans require a 25% down payment. For 2 or more units multi-family financing, FHA only requires a 3.5% down payment while conventional mortgage loan programs, the minimum down payment requirement is 15% down payment for 2 or more units multi-unit home purchases.
Mortgage Qualification Requirements: Income, Credit, Assets
A home buyer needs to have income to support their mortgage payments and other debt obligations. Days of no doc mortgage loans have long been gone. Showing proof of income can be problematic to self employed home buyers if they write a lot off their tax returns and show very little income. If you have a perfect credit score but little or no income, you will not qualify for a mortgage loan unless you can get a non-occupied co-borrower. However, if you have poor credit but have income, you can qualify for a mortgage loan. If your credit is very bad and your credit scores are low. then your mortgage loan originator can help you in boosting up your credit score by re-establishing your credit in order to qualify for a residential mortgage loan. It may take a little time but you can qualify for a mortgage. There are mandatory waiting periods for those who have filed bankruptcy and/or had a prior deed in lieu of foreclosure, foreclosure, or short sale. 2 years from the discharge date of a bankruptcy with re-established credit is the waiting period for those who have filed bankruptcy. For those who had a foreclosure or a deed in lieu of foreclosure, the mandatory waiting period is 3 years from the date of the sheriff’s sale or the date their name was removed from the deed and into the name of the mortgage lender. For short sales, it is the date of the sale of the home reflected on the HUD’s settlement statement.
FHA BACK TO WORK EXTENUATING CIRCUMSTANCES DUE TO AN ECONOMIC EVENT: ONE YEAR WAITING PERIOD TO QUALIFY FOR A MORTGAGE LOAN
For those who had a bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, they can possibly qualify for the one year waiting period Back to Work Extenuating Circumstances Due to An Economic Event if they have been unemployed or underemployed at least six months prior to the bankruptcy, foreclosure, deed in lieu of foreclosure, short sale which has caused a reduction of the borrower’s household income of at least 20%. The borrower needs to have had good credit leading to the economic event and have re-established credit after the economic event. If you are a mortgage loan borrower in Illinois, Florida, Wisconsin, California or Indiana and feel you qualify for FHA Back to Work Extenuating Circumstances due to an economic event mortgage program, please contact me at 262-716-8151 or at www.gustancho.com .
By Gustan Cho