By Nathan Rich
Loan Officer at The Wood Group of Fairway, a Texas mortgage lender
There’s a lot of assumptions made about buying a house. Do you have to make a 20% down payment with a 700+ credit score? Here’s what you really need for home loan approval.
If you’re a first-time buyer (or haven’t bought a home in the last three years), you can be approved for a home loan with a credit score as low as 580. VA loans, for veterans and active service members, require a credit score of 620.
An excellent credit score of 750+ will help lower your interest rate, but it’s certainly not a requirement.
Mortgage lenders like to see your debt-to-income (DTI) ratio at 55% or lower. That means your monthly debts should equal 55% of your monthly income.
What do lenders count toward your debts? Here are some common debt sources:
First-time buyers are only required to put 3.5% down with the FHA loan program. Veterans and rural-area borrowers may qualify for 0% down. A conventional loan requires 20%, and is typically used by repeat homebuyers.
Down payment assistance programs are also available. Some programs can give you as much as 6%, and you never have to pay it back.
What do You Qualify For?