Over the last 3 yrs the Mortgage Industry has endured many, many changes…
- No more Sub Prime Mortgages
1) No Doc
2) No income
- The four basic Loans now consist of Standard Convention Loan, VA, and FHA & USDA
- The Standard Conventional Vanilla Mortgage requires a 620 score and the rates/terms are adjusted by credit score from 740 to 620 and exhibit weaker pricing for every 20 points on that scale to the lower…10% down payment can now be attained by using Private Mortgage Insurance w/ a 700 credit score on a Primary Home, 740 score for 2nd Home. Investment Property purchase will not allow for any private Mortgage insurance and would require 20% down payment…many will want to avoid private mortgage insurance by putting down 20% on primary and 2nd homes also…Private Mortgage Insurance will require no higher than a 45% debt to income ratio. Rates are presently at record lows for 30 & 15 yr fixed rate loans…. Conventional loans can allow seller to pay up to 8% of purchase price in closing costs to help buyer at settlement…Investment properties only allow for 2% of purchase price paid by seller for buyers closing costs. The buyer debt will normally need to be fewer than 40% of his gross income for the new housing payment and the overall debt cannot be above 50% of his gross income
- FHA is driving the Loan market w/ over 60% of loans being done and requires a 640 credit score normally and 3.5% of purchase price for down payment requirement and seller can pay up to 6% of purchase price for buyers closing costs…although many banks who are selling foreclosure homes will only be willing to pay 3 to 3.5% for buyers closing costs as overlay policy…anyone can be eligible for an FHA Loan as long as house is a Primary Home. The buyer's debt can be about 40% of the income for housing and maximum 55% of the income for total debt
- VA - Normally will require a 640 credit score, but has a zero down payment requirement and seller can pay up to 4% of purchase price for buyers closing costs… VA notably has no monthly private mortgage insurance fees so it is very strong for all veterans. VA Loan is required to be used as a primary home for either the Veteran, retired veteran or the veterans wife…Most VA Loans are done by married veterans or a retired veteran since loan requires either veteran or wife of veteran to be able to reasonably able to drive to home each day…Single veteran is not normally eligible for loan since he is stationed away from area he wants to buy in…, but he is also ok if he is stated near his base of work… The buyer's debt can be about 41% of the income for housing and about 50% of his income total.
- USDA - This Government Loan is used only in rural areas and required no down payment for primary home only… Seller can pay up to 6% of the purchase price for buyers closing costs…. Loan as very tight debt ratios….31% of his income can be for housing and maximum 43% of income for total debt….If house is over 7 yrs old the debt ratios can decrease to 29/41 debt to income for housing & total debt. No pool homes and must be in Unincorporated areas…
- County Assistance Funds - many Counties now will have a Housing Authority that will give money for a Primary Home buyer and pay for all closing costs and down payment dollars if they meet the low to low/middle income requirement…Depends on family size for maximum income restrictions… A family of 4 in Lee County can make about $41,000.00 annually for all household income…
- Most lenders will require a minimum 30 days on sales contract for closing… Some banks may request slightly longer time frame….
- Be prepared to pay for an Appraisal at loan application (Normally about $350.00 to $400.00). Most Mortgage lenders will waive any application fees on loan
- Most Government Loans will require a 2 yr total Employment history… Not necessarily 2 yrs in a row if there has been a previous employment history… If graduating from college that time will normally be sufficient and just being at job will be acceptable…
- Commissioned and Self Employed buyers can expect to have 2 yrs Income tax history to attain Mortgage industry usable income….very few exceptions to this rule.
- Credit Score Improvement tips:
1) pay down credit cards account to 30% of credit card limit. This is huge and can make score go up tremendously and very fast.
2) if you don't have credit card try to attain a new one ( secured by your bank or other ) and keep balance under 30% of credit card limit
3) pay off newer non medical collections…medical collections are less hurtful to credit scores….
3501 Del Prado Blvd.
Cape Coral, Fl. 33904 Suite 110