The 4 Primary Qualifications for a Mortgage
Information regarding qualifying for mortgages under 2009 guidelines. The information below discusses the minimum’s to qualify for a mortgage and I am happy to discuss how to fix, address, or how to make better any section. There are 4 primary qualifications and generally speaking you have to make each segment in order to qualify for a mortgage, every mortgage has exceptions and it’s own scenario specific questions, please take the information below as a general outline and feel free to ask questions
- HISTORY
- CREDIT
- DOWN PAYMENT, ASSETS, RESERVES
- DEBT TO INCOME RATIO
History is primarily two fold, work history and rent/mortgage payment history. In terms of work history you must be able to document two years of employment. In terms of payment, you can not show any late mortgage payments in the last two years, rental payment history takes a letter from the landlord stating rent payments are made on time.
FHA has the lowest credit requirements, as a general statement 620 will be the minimum allowed credit score, no bankruptcy’s or foreclosures in the last 2-3 years. Any outstanding judgments, collections, non-current items will need to be addressed and often paid.
Outside of the VA loan programs every loan requires a contribution from the buyer, FHA has the minimum at 3.5%. But in addition to down payment for purchasing a home, there are other costs, property taxes, insurance, title, appraisal, bank fees, etc, thus increasing the needed money. These additional costs can be larger than the actual 3.5% down payment The FHA does allow for up to 6% concessions that can help pay for some or all of these additional costs, but you will still have to contribute the minimum 3.5% from your own funds, or family member gift funds.
This is a factor of the amount of documentable qualifying income verses the amount of existing monthly minimum payments plus the new house payment including taxes and insurances. In general the goal is less than a 45% debt to income ratio. A very general example would be as follows. Gross annual income $48,000, as a monthly number $4,000/month. 45% of this number is $1,800. If you were to subtract minimum payments for credit cards at $100, a car payment of $400, and student loans at $200, this would leave $1,100 left over for the new PITI payment on the house.
