Basic Mortgage Qualifications Provided by Nova Home Loans

Ever wonder what it would take to go from a life-long renter to a home owner?  Here is a great guide provided by Nova Home Loans to help you understand the differences and qualifications for the 3 main loan programs.

FHA:

  1. Primary Residence Only
  2. Cannot have 2 FHA loans (in most cases, ask for details)
  3. 640 minimum credit score
  4. Foreclosure: 3 years passed
  5. Bankruptcy: 2 years passed
  6. Short Sales: with late payments - 3 years like a foreclosure; without late payments, potentially you can buy right away.
  7. 2 year history of stable employment
  8. Debt to income: total debt, including new housing payment should be approximately 45% of your gross monthly income.  Income calculations vary. Debt generally taken from credit report plus things like child support (not utilities/insurance/etc.)
  9. Down payment of 3.5% of purchase price and can be gifted.
  10. Seller can pay costs up to 6%
  11. Non occupying co-signers allowed.
  12. Must include debts of a spouse even if not on the application
  13. Flips OK after 30 days.  Appraisal review of 2nd appraisal if contract is more than 20% over Seller's purchase price.
  14. $346,250 max loan amount in Maricopa County.
CONVENTIONAL LOANS:
  1. Primary or 2nd Homes or investment properties
  2. Can apply as sole and separate.  Spouse's debts and credit not considered
  3. 620 credit score
  4. Foreclosure: 7 years
  5. Bankruptcy: 2-4 years 
  6. Down payment 3% minimum (minimum credit score and maximum debt ratios apply)
  7. Rate is sensitive to credit score & down payment
  8. Short Sale: 2 years
  9. Must qualify for full monthly payment on investment properties unless have a 2 year history of being a landlord.
  10. Buying for a relative to occupy is an investment property to the borrower.
VA:
  1. More flexible underwriting than FHA or Conventional
  2. Must have a termite report
  3. 100% financing
  4. No monthly MI (mortgage insurance)
  5. Upfront funding fee of 2.15%-3.35%
  6. Primary Residence
  7. 2 years since short sale, bankruptcy or foreclosure
  8. Borrower and spouse only or 25% down on co-borrower half of the loan.
  9. 100% up to $417,000 loan amount.  75% on amounts over $417,000.

** To get a loan, you will always need you tax returns for self-employed borrowers (personal and business)
** Must always check for unreimbursed employee expenses
** Tax returns must match IRS transcripts
** Can't use bonus, overtime or commission income until there is a 2 year history
** Credit is pulled again before funding and after closing too.
** Credit counseling generally OK after 12 months
** 2nd Homes must never be converted to a rental per the closing documents
** Buy and bail situations.  If you say you are going to rent your existing home out, you must rent it out.
** All parties in transaction are cross referenced against the LDP/GSA list
** Quick closing vs. smooth transactions.
** Check into LO licensing or NMLS#

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