“Fast away the old year passes” could never be more true than it is right now. With that said, I am providing for you a quick guide as to how to qualify for a traditional FNMA loan and more importantly for those that have one, any rule changes that are set to go into effect on January 1st, 2022. For those that are purchasing their first home and are fortunate enough to have saved money to meet the 20% down requirement, here is what you need to qualify for a home mortgage:
Down Payment
LTV (your equity position) is God! You must put down at least 20% of the purchase price or the appraised value of the home to qualify. This requirement, since this is a purchase is subject to the contract. Many sellers feel their home would command a stronger sales price than what the market will bear in the area or what the actual condition of the home is. This is where your negotiating skills as a borrower will be handy. If you have any questions, I urge you to work with a realtor who knows the area well. You can put down as little as 10%, but you will have to pay private mortgage insurance monthly, so the exposure (potential risk) for the lender is mitigated in the event of a default.
Credit
The minimum credit score for a FNMA fixed-rate mortgage is no less than 620. Under a new rule that is enforced by the CF, it is a violation for a creditor to report delinquency to a credit reporting agency before notifying the borrower of the delinquency. In other words, if you are late on your car payment, the creditor cannot report you as being late before contacting you to correct the error. This rule went into effect on November 30, 2021. It is incumbent on you, the borrower, to monitor your credit report and if there are erroneous debts, incorrect information, or a violation of the rule I just mentioned, you must initiate corrections. Your loan officer will provide the information about how to contact the creditor(s) to accomplish this.
Income
Your income must be able to support the loan payment. The maximum debt to income ratio that a lender will allow is no more than 43%. The reason for this is to avoid a default on the loan and to make sure that you are not “house rich and cash poor”.
Employment
If you are a first-time homeowner AND you just graduated from college, does this mean you won’t qualify for a home loan? Many people feel that this is just the case…it is not! As long as you are employed in the same field as your degree is in, you have the income as listed above to support the loan payment and you have met the credit requirements, qualifying for the loan will be that much easier. However, all things being equal, everything is “subject to”… In terms of employment, the Verification of Employment that the loan processor at 7th Level Mortgage will send out will ask about your employment as well as whether or not the employer can state whether or not in his estimation you will continue to be employed there for at least two years. What if you have received helpful reviews a promotion? With a promotion, an increase in income usually follows. What about a transfer? If your employer is transferring you to another state or department, and you will continue in the same line of work and/or there is an increase in income, qualifying will be easier as well.
Appraisal
This is where, for virtually every mortgage transaction, the rubber meets the road. Many people want to buy a home, however, there are occasions where the loan does not meet the requirements to pass appraisal guidelines. In one instance, I originated a loan and everything seemed fine until the appraiser went out and saw that the home was right next door to an Acme supermarket. Because the home was deemed to be too close to a commercial establishment, and because there were no comparable properties in the area, it was not possible to provide financing. Another case where the property did not meet muster was where the property was abutted next to a set of railroad tracks. This represented a safety issue and again, this property would not pass the appraisal guidelines either. Please make sure that if there potential issues like those I just mentioned are brought to the attention of the loan officer at 7th Level Mortgage
If you have any questions regarding conventional loans or any other type of lending, please ask your loan officer at 7th Level Mortgage. These professionals are paid to serve, advise and help you throughout the entire process.