Buying a house can be daunting, and the mortgage/financing part is often the MOST daunting. Here at Sunray Mortgage, we help individuals every day get qualified for these mortgages and clear each hurdle along the way.
There are 3 hurdles you’ll need to clear in order to get qualified for a mortgage. They are as follows:
- Credit Score
- Debt-to-Income Ratio
- Down Payment
Now let’s talk about each one in detail so you can begin to plan accordingly.
What Credit Score Do I Need?
In order to get qualified for a mortgage, typically a borrower needs to have a credit score above a 580. The higher the credit score you have, the more mortgage options you have and the better your interest rate will be.
Think your credit is not where you want it? Try pulling a new credit report using one of the major credit reporting agencies like Experian. Once you have it, look first to see if there are any “Collection” accounts, or if there is anything derogatory on there. If there is, you’ll want to make a plan to get those accounts in good standing as soon as you can. Additionally, paying down maxed-out credit cards or high balance credit cards can raise your credit scores quickly.
Debt-to-Income Ratio is called DTI for short. To calculate your DTI percentage, a lender will total up your monthly payments that go toward debt (credit cards, car payments, student loans, personal loans, etc.) and divide that number by your monthly income. The resulting number has to be below 50% in order to be qualified for a home mortgage.
Typically, it is healthy (normal) for an individual to have around 30-35% DTI. Meaning, 30-35% of their monthly income is going towards all of their debts. While you can be approved for a loan closer to 50%, you should review your finances and see what you can truly afford when it comes to being qualified for a mortgage.
If you have a higher than normal DTI, review your credit report with a mortgage professional. Are there items you can pay off directly or pay down to help lower your monthly obligation? Is there any short term or long term debt that can be renegotiated with the creditor? All of these can help lower your debt load and decrease your DTI!
That pesky down payment. Depending on your income and credit score, the minimum down payment can be as little as 3% (or if you are a Veteran, perhaps 0%). So, for a $200,000 home, a 3% down payment would be $6,000. Your down payment can come from a variety of places like checking/savings account, retirement account, IRA, or you can receive a gift from a family member to assist you.
If you are a qualified veteran, the VA will allow you to get qualified for a mortgage with no down payment. Sunray Mortgage has great loan options for Veterans in Texas.
Feel free to speak to one of Sunray’s licensed mortgage professionals about your down payment options.
Get a Custom Mortgage Quote
Contact your Sunray Mortgage Loan Expert about your options, and they will be happy to assist you in creating a mortgage quote.