The Truth About Mortgage Qualifying in 2011
There is an incredible amount of mis-information in the newspapers, on T.V. and Radio, and on the internet about what it takes to qualify for a mortgage loan today. This wrong information is discouraging many home buyers we talk to every day from entering the market. Here is the truth about the key subjects:
- MORTGAGE AVAILABILITY - you hear over and over that mortgage money is tight. THE TRUTH: FHA, VA and FNMA and Freddie Mac have a ton of money to lend. There is no shortage of mortgage funds.
- DOWN PAYMENT - A CNN money analyst recently said that buyes today need at least a 20% down payment to buy a home. THE TRUTH: FHA requires only a 3-1/2% down payment. VA requires "0" down payment. Fannie Mae and Freddie Mac have 95% loans available. You do not need 20% down to purchase a home.
- CREDIT - many articles and newscasters are
saying that you need PRISTINE or PERFECT credit to qualify for a
home loan. THE TRUTH: All you need is a 640 minimum credit
score (and no recent bankruptcy, short sale or foreclosure) to
qualify for a loan.
- Bankruptcy - loans are available 2-3 years after a bankruptcy has been discharged.
- Short sale - loans are available 3 years a short sale generally. If there were extenuating circumstances, the time may be shortened.
- Foreclosure - FHA will lend to a borrower 3 years after a foreclosure and VA 2-3 years afterward.
- QUALIFYING RATIOS - Tons of articles state that lenders have incredibly tight qualifying ratios (28/36). THE TRUTH: We have gotten many loans approved with debt-to-income ratios of 40 (and sometimes higher). The better the other aspects of the loan are - good credit score, good job tenure, adequate assets etc. - the more likely an underwriter is to approve a loan with higher ratios.
- RESERVES - we heard one broadcaster say: "a buyer needs 6-12 months reserves in the bank after they make the down payment and pay closing costs. THE TRUTH: FHA and VA loans don't require any reserves, and Fannie Mae usually require 2 months reserves.
If you really want to buy a home, your first step needs to be to sit down with a Cherry Creek mortgage consultant who will analyze every aspect of your finances and credit to make sure you can qualify to buy. If there are some issues that need to be worked on, he/she will assist you in making your home buying dreams come true.
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