So now you know! The max house payment you would qualify would be the $890, because it is the lowest payment of the two ratios.
1. Mortgage Rates Change
Just like the stock market, mortgage rates change throughout the day. Mortgage rates you see today may not be available tomorrow. If you are in the market for a mortgage loan, be sure to check the current rates being offered by lenders. If you have already done your research and have found your dream home, consider locking in your rate as soon as possible.
2. Different Lenders Charge Different Fees
Don’t expect every lender to charge the same fees for a mortgage loan. Every lender structures their fees differently, which is why it is important to shop with at least 3 lenders to compare. Next time you apply for a mortgage loan pay attention to the rates, points being charged and closing costs.
3. Lenders Can Sell Your Loan to Another Bank
Many borrowers have experience getting a mortgage loan with a certain lender only to find out that the loan has been sold to another bank. This occurs because lenders need to free up their liabilities in order to make room to give out more loans. This does not affect your mortgage whatsoever, but it’s important to pay close attention to your mortgage statement and any correspondence you receive in the mail to make sure you do not make payments to the wrong bank.
4. Your Middle Credit Score Matters
When you apply for a mortgage loan, the lender will pull your credit scores from three credit bureaus (Transunion, Equifax and Experian) to help them determined if you are credit worthy. Your middle score of the three is what lenders will use for loan qualification. However, the underwriter will review all three scores as part of the loan underwriting process. If you pull your own credit score through a website online, the credit scores displayed to you may be different than what lenders use because they use different reporting systems.
5. A Low-Down Payment for a Mortgage is Possible
You don’t have to come up with a 20% down payment to obtain a mortgage loan. You can get a FHA mortgage loan with a down payment of 3.5%. The VA and USDA loans required no money down. VA loans are reserved for military veterans and their families. USDA loans are typically used for rural or farming properties. A Conventional 97 Loan Program has a down payment requirement of only 3%. Freddie Macand Fannie Maealso have loan programs that allow for a 3% down payment.
Take note that many lenders will require some type of mortgage insurance for loans that have less than a 20% down payment on a purchase loan, or less than 20% equity available on a refinance.
6. You Can Refinance Your Home Loan Anytime
You can refinance your mortgage anytime, but it doesn’t necessarily mean you should. Think about why you want to refinance. Is because you want to lower your monthly payments, to change the type of loan you are in or to take cash out from your equity? Whatever the reason is, make sure that it makes financial sense.
7. You Can Get a Mortgage Loan After a Foreclosure
Many homeowners have experienced a foreclosure after the recent mortgage crisis. There is good news for these borrowers because they can get a mortgage loan after foreclosure. There are waiting periods involved, for example, to apply for an FHA loan you must wait three years after foreclosure to apply. If you want to get a conventional loan the waiting period is seven years from foreclosure. For those seeking a VA loan, the waiting period is two-years.
There are exceptions to the waiting periods, but you have to show the lender that your foreclosure was caused by an event outside your control, such as losing your job or being seriously ill.
8. Good Credit Allows you to Get Better Mortgage Rates
Good credit scores mean a better rate in any type of loan, especially a mortgage loan. Your credit heavily impacts the type mortgage loan you will qualify for. To maintain a good credit report, make sure you monitored it closely. One of the advantages to good credit is that more banks will want to compete for your business, therefore giving you leverage to negotiate the closing costs.
9. Know Your Annual Percentage Rate (APR)
Knowing yourAPRwill allow you see the true cost of your loan. While the interest rate shows the annual cost of your loan, the APR includes other fees such asorigination points, admin fees, loan processing fees, underwriting fees, documentation fees, private mortgage insurance and escrow fees.
There may be more or less fees included in the ARP from what we mentioned. To be sure what fees are included in the APR, ask your lender to give you a breakdown of theclosing costs included
10. You Can Always Reduce Closing Costs
One way to reduce closing costs is to have the sellers contribute towards the closing costs when purchasing your home. This can be negotiated between the buyer and the sellers in the purchase contract. The amount the seller can contribute will depend on the type of loan. Another way to save on closing costs is to have the lender give you a credit to cover out of pocket loan costs.
FAQs
FHA loans are backed by the Federal Housing Administration and offered by FHA-approved lenders. Unlike FHA loans, conventional loans are not insured or guaranteed by the government. Mortgage insurance is mandatory with FHA loans; you can avoid it on a conventional loan by putting down at least 20%.
What's a conventional loan vs FHA? ›
FHA loans are backed by the Federal Housing Administration and offered by FHA-approved lenders. Unlike FHA loans, conventional loans are not insured or guaranteed by the government. Mortgage insurance is mandatory with FHA loans; you can avoid it on a conventional loan by putting down at least 20%.
What credit score is needed to buy a house in KY? ›
Here are some general FHA loan requirements for Kentucky. A credit score of 580 or higher: A lender may accept credit scores of 500-579 under certain conditions. A credit score lower than 580 will require a larger down payment. Minimum of two years employment: Must have verifiable, steady, and consistent income.
What type of home loan is the easiest to qualify for? ›
Government-backed loan options, such as FHA, USDA and VA loans, are typically the easiest type of mortgage to get because they may have lower down payment and credit score requirements compared to conventional mortgage loans.
How to qualify for a USDA loan in KY? ›
Eligibility Requirements – Kentucky
- NO down payment – Finance 100% of your home.
- NO maximum loan amount in Kentucky.
- NO assets needed to qualify.
- Flexible credit guidelines.
- Competitive, fixed interest rates so payments do not increase.
- USDA Loans are for new and existing properties.
Higher Closing Costs
As noted above, conventional loans tend to have lower closing costs (and be cheaper in general) than government-backed options. However, the downside of conventional loans is that they don't offer as much flexibility to help you avoid paying those costs upfront.
What are the drawbacks of doing an FHA loan? ›
Here are some FHA home loan disadvantages:
- An extra cost – an upfront mortgage insurance premium (MIP) of 2.25% of the loan's value. ...
- Home price qualifying maximums are set by FHA.
- Interest rates are higher than with conventional loans (based on relaxed borrower eligibility requirements)
To qualify for a conventional loan, you'll need a credit score of at least 620, though some lenders may choose to approve conventional mortgage applications only for borrowers with credit scores of 680 and up.
Is it hard to get a FHA loan? ›
While conventional mortgages usually require a credit score of 620 or more, FHA loans are open to borrowers with credit scores as low as 500. You don't need a big down payment. If your credit score is 580 or more, you could qualify to put down just 3.5%. Interest rates are competitive.
What credit score is needed to buy a house with no money down? ›
You'll usually need a credit score of at least 640 for the zero-down USDA loan program. VA loans with no money down usually require a minimum credit score of 580 to 620. Low-down-payment mortgages, including conforming loans and FHA loans, also require FICO scores of 580 to 620.
How much do I need to make to buy a $300K house? To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.
What is the hardest home loan to get? ›
1. Conventional loans. A conventional loan is any mortgage that's not backed by the federal government. Conventional loans have higher minimum credit score requirements than other loan types — typically 620 — and are harder to qualify for than government-backed mortgages.
Which bank offers cheapest home loan? ›
Home Loan Interest Rate All Banks
| Name of the Bank | Rates of Interest* | Processing Fee |
|---|
| Kotak Mahindra Bank | 8.75% p.a. onwards | 2% |
| Bank of Baroda | 8.60% p.a. onwards | Up to 0.50% of the loan amount |
| Union Bank of India | 8.70% p.a. onwards | 0.50% of the loan amount |
| Central Bank of India | 8.35% p.a. onwards | None or up to 0.50% |
36 more rowsDec 17, 2023
USDA Loan Income Limits and Eligibility in 2024
The current standard USDA loan income limit for 1-4 member households is $110,650, up from $103,500 in early 2023. The 2024 limit for 5-8 member households is $146,050, up from $136,600.
What income documentation is required for USDA loan? ›
Federal income tax returns or IRS transcripts with all schedules. Evidence of additional property or assets retained by the applicants through title, bank statements, etc.
What is the limit on a USDA loan in Kentucky? ›
Kentucky 2024 County Income Limits For USDA Rural Development Loan
| County | 1-4 Occupants | 5-8* Occupants |
|---|
| Clinton | $110,650 | $146,050 |
| Crittenden | $110,650 | $146,050 |
| Cumberland | $110,650 | $146,050 |
| Daviess | $110,650 | $146,050 |
116 more rowsA conventional loan is often better if you have good or excellent credit because your mortgage rate and PMI costs will go down. But an FHA loan can be perfect if your credit score is in the high-500s or low-600s. For lower-credit borrowers, FHA is often the cheaper option. These are only general guidelines, though.
Why do people prefer conventional loans over FHA? ›
Because a conventional loan typically requires higher credit and more money down, sellers often deem these reasons as a lower risk to default and traits of a trustworthy buyer.
Why do buyers prefer conventional over FHA? ›
Both conventional and FHA loans have their own pros and cons for those looking to buy or sell a home. For homebuyers, conventional loans offer greater flexibility on property types, higher loan limit values, and the opportunity to remove private mortgage insurance.
Why do realtors prefer conventional loans over FHA loans? ›
Home sellers sometimes prefer conventional loans due to the stricter appraisal that's required with an FHA loan. An appraisal for an FHA loan might dig up more issues with the home, which in turn can delay the home sale process as the seller works to fix them.
