Whether you’re planning to buy your first home in 2021 or buying your first rental property, you’ll probably need to get approved for a mortgage loan. Mortgage is a loan for the purchase of a property. Applying for a mortgage is the biggest step in the process of home buying and the most most important part is getting approved. It may seem a little intimidating at first, but with the right preparation, the easier it will be to get approved.
Homeownership comes with rewards, and long term commitment to the responsibilities attached to owning home. Lenders will not just give you a huge loan right away. The creditor will evaluate you’re financial health and assess whether or not you’re prepared for the biggest loan that you’ll probably make. There are factors that can affect your mortgage approval. There’s a lot you can do to get your application approved and move forward with buying your dream home in Houston. The following tips will help you avoid the heartaches of getting rejected for a mortgage.
Minimum FHA Loan Requirements in Texas
These are just the basic eligibility for FHA Loan Requirements in Texas. There may be additional requirements depending on the type of home loan and the lender you choose to work with as you apply for mortgage.
1. Down payment
The minimum down payment is 3.5% of the appraised value or purchase price. Your down payment doesn’t have to come from your own pocket money. Approved sources and family member can contribute and this must be properly documented.
2. Credit score
Borrowers must have a credit score of 500 or higher. For 3.5% down payment, you must have a score of 580 or higher.
3. Debt-to-income ratio (DTI)
DTI is your total monthly debt (credit card debt, student loan, auto loan, etc.) divided by your gross (pretax) income. This means that a lower debt-to-income ratio can increase your chances of getting approved for a mortgage.
4. Employment
You are required to show proof of employment and steady income for the past two years. Frequent employment changes must also be submitted with explanations. These will show that you’re capable of paying off your home loan.
5. Mortgage insurance
On FHA loans where you can make a low down payment, you’ll normally be required to pay for some kind of mortgage insurance in case you default on your loan.
6. Occupancy
Whether you are purchasing a single-family house or a two-unit property, the house must be your primary residence for the first year at least.
Let’s briefly discuss how you can increase your chances of getting a mortgage approved now that you know the minimum requirements of FHA loans in Texas,. There aren’t any shortcuts to guarantee the approval of your application, but you can educate yourself on ways to help get your mortgage application approved.
How to get your Mortgage Application Approved
1. Know your Credit Score
Knowing where your credit score falls on the credit score range is essentially helpful on determining whether you can get approved for a mortgage or not. FICO and VantageScore Solutions create the most widely used consumer credit scores.
What these credit score ranges mean to your chances of getting approval?
Poor: 300 to low-600s – You might not be able to get approved for a loan.
Fair to good: Low-600s to mid-700s – You’re more likely to get approved, but might not get the best terms.
Very good and excellent/exceptional: Above mid-700s – Most likely to get offered a low interest rate and the most options when it comes to choosing repayment periods or other terms.
To increase and improve your credit score, you can clean up your credit history by paying your bills on time and full, lowering your debt, and using less than 30% of your overall credit limit to name a few. This is just one of the few crucial steps when getting approved for a mortgage.
2. Save for more
While the average is to have a 3.5% down payment, it is better to save for more. Aside from the down payment, you also need to pay for other fees like home inspections, closing costs, title searches, application fees, and credit report fees.
3. Don’t leave your job
Having a job and a steady income during the home buying process is crucial. Any changes to your employment or income status will affect your mortgage application. Quitting your job in the middle of your application will only make your lender reevaluate your finance to see if you still qualify and get approved for a mortgage loan.
4. Pay down your existing debt
Lenders evaluate your debt-to-income ratio before approving your mortgage application. As a rule, your entire monthly debt payments, including the mortgage shouldn’t exceed 36% of your gross monthly income. You should also avoid any major purchases and acquiring new debt because lenders re-check your credit before closing.
5. Get pre-approved for a mortgage
A Mortgage pre-approval determines the loan programs that you may qualify for, how much you can borrow, and the terms and interest rate you qualify for. This assessment allows you to find a Houston house that you can afford and avoid payment shock. If your mortgage pre-approval turns out positive, the lender will give you a printed letter of pre-approval.
6. Know what you CAN afford and CAN’T
Mortgage lenders consider all information in your application so, it’s important to know how much is within your budget. Lenders can get generous on your application because they might not know all your other expenses. At the end of the day, only you can fully understand your financial status and what you can realistically afford in the future. Be smart on your choices and prioritize your financial health first because home buying can be the biggest decision in your life
Buying your first home can feel intimidating and it can get even more stressful when you’re not prepared. Getting approved for a mortgage loan is just part of the home buying process. The key to make you less anxious and go through the whole process in better shape is to do your homework and surround yourself with knowledgeable real estate agents who can guide you from start to finish.
Are you currently working toward realizing your dream of home ownership? What steps have you taken? Let us know in the comments below. If you find this blog post helpful, please consider sharing it with others.
ApexPro will help you create and implement a more realistic plan to get you approved for a mortgage loan. Contact us today for more home buying information.