How Many Questions Are In The Pre-Licensing Real Estate Exam Qualifying for a Home Loan in 2019 – What Requirements and Guidelines You Need to Know

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Qualifying for a Home Loan in 2019 – What Requirements and Guidelines You Need to Know

1) How much of a Down Payment do I need to make?

In the recent past, people used to think that 20% down was necessary to qualify for a home loan or have a reasonable mortgage payment. For the most part, this is no longer the case. There are many types of loan programs that allow low payment options or no payment in some cases. You also don’t have to be a first-time home buyer to qualify for these programs.

The FHA Loan is one of the most popular types of mortgage applied for in the market today, mainly because of the low payment options and the flexible qualification requirements. Without down payment assistance, you need a minimum of 3.5% down. Many people think that the FHA is strictly for first time home buyers, but that is not true. It’s a government-backed home loan, but they don’t require you to be a first-time home buyer. FHA is the Federal Housing Administration.

Conventional Loans have gained a lot of traction in the last few years and will soon replace the FHA loan program as the most popular loan product on the market. Conventional loans allow a minimum payment of less than 3% and also allow many creative ways to purchase monthly PMI (Private Mortgage Insurance). This strategy helps reduce monthly payments while increasing your purchasing power.

Minimum Down Payment requirements for each loan type below:

VA Loans – No Down Payment Required

USDA Loans – No Down Payment Required

FHA Loan – Minimum 3.5% Down Payment required

Conventional Loans – Minimum 3% Down Payment required

You can use gift funds for any of the programs listed above. Also, If you are a first time home buyer be sure to ask your loan consultant if you qualify for any down payment assistance programs.

2) What Credit Score do I need to qualify for a Mortgage?

Aside from income verification, one of the biggest factors in qualifying for a loan is your credit score. The higher the credit score the better your chances of qualifying. When a mortgage company or bank checks your credit for a mortgage application they will pull what is known as a tri-merge. That’s when a credit report is combined with data and individual scores from the 3 major credit agencies. Equifax, Experian, and TransUnion. The middle of the 3 points will be used to determine your qualifying score. Ideally, you want to have an average credit score of 680 or higher. In most cases, the higher your credit score, the better your rate and term.

There are minimum credit score requirements for each loan program, but to ensure you qualify for the most competitive terms it is important that you do everything you can to learn how to increase and improve your credit.

Below are the minimum credit score requirements for each loan program:

VA Loans – 620 (some lenders may allow as low as 580+)

USDA loans – 620

FHA Loan – 580

Normal – 620

3) What are the Income Requirements and Guidelines for a Mortgage?

Proving your ability to repay the loan is one of the most important requirements in the qualification process. That’s why showing adequate and consistent documentation of income is essential when going through the pre-approval or qualification process. If you are a W2 employee and pay a salary then the verification process is simple. However, it can be more difficult for people who receive and/or rely on commissions, bonuses, overtime, etc. more write-offs and deductions if you are self-employed.

First and foremost you need a 2 year work history to qualify using any source of income. However, for full-time hourly or salaried employees that doesn’t mean you have to be in the same company or industry for 2 years. It used to be a requirement but not anymore unless the lender/bank has their own overlay. If you receive and want to use commission, bonus, overtime or other types of income then you must show a minimum of 2 years of history and the bank / lender will use an average of 24 months for these purposes qualified. Self-employed borrowers can now qualify with 12-24 months of bank statements for some non-traditional (non-QM) loan programs.

Eligible Sources of Income:

* Full-Time W2 Income/Salary

* Income from Part-Time Work (must be in work for at least 1-2 years in some cases)

* Income from a second full or part-time job

* Overtime, Commission, Bonus (must be averaged over 24 months)

* Seasonal (must prove 2-3 years of consistency)

* Self-Employed Income

* Bank Statements (12-24 months)

* Permanent Disability

* Retirement/Pension

* Child Support/Alimony (Sufficient documentation required)

* Asset Depletion

What are the Necessary Documents Required?

There are certain required documents that your loan consultant will need to request in order to process your loan approval. You should have the below list of documentation readily available and be prepared to provide more depending on your particular situation.

* Complete Federal Personal and/or Corporate Tax Returns for the last 2 years (ALL Schedules)

* W2 for the last 2 years

* 1 month worth of Pay Stubs

* Bank Statements (may need anywhere from 2-24 months)

* Letters of Retirement/Pension and/or Social Security Award

* Disability Award Letter

* Divorce Decree

* Business License

* Asset Documentation

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