For most Americans purchasing a home is the largest investment they make and is usually the largest asset they have. If you are ready to purchase a new home or refinance an existing mortgage, it is important you understand the mortgage process and the different products available on the market. The first step is understanding which type of loan is right for you – Conventional, FHA, VA, or a Private Portfolio Mortgage.
Sometimes, it is more difficult to determine if you should pursue a conventional or FHA mortgage. Ocean Lending is your neighborhood Mortgage Broker in Mission Viejo and we are here to make sure that you pursue the mortgage that is perfect for you.
In order to receive a conventional loan a good credit history and score is required and so is a down payment of at least 20% to avoid paying private mortgage insurance (which can greatly increase your monthly payment). If this does not sound like something you fit into, DON’T WORRY! This is where FHA starts to shine. FHA mortgages do not require good credit history or large down payments. One common misconception is that FHA mortgages are available for only first-time home buyers, this is NOT true. If you have purchased a home before, you still may qualify for an FHA loan.
1. Good credit is not mandatory. Of course having good credit is always better than having poor credit, but hey! sometimes things happen, we understand that. Ocean Lending is able to help you purchase or refinance with a credit score as low as 500!
2. Low down payment requirements. One of the major advantages the FHA mortgage product is the lower down payment. You can get qualified for an FHA loan with as little as 3.5% down. Borrowers can even use gifted funds for the down payment! This means more money you get to keep in your pocket, for reserves, renovations, college funds for your kids? What would you use the extra money in your pocket for?
3. Major credit problems are okay! If you have had a major credit issue such as a bankruptcy or foreclosure, you do not have to wait as long to purchase when compared to a conventional loan product. Through FHA you can purchase 2 years after a bankruptcy and 1 year after a foreclosure that was due to a drop in income.
4. You can have higher debt. Yes, you heard me correctly, you can have more debt. FHA loans are not held to tight debt-to-income ratio guidelines of 43% like conventional mortgages are. With the right scenario you can push your debt-to-income ratio as high as 55%. What does this mean for you? This means your purchase power is increased! If you are allowed to have a higher debt-to-income ratio you are able to increase your mortgage loan amount (debt), so you can purchase the home of your dreams.
5. You can have a co-borrower that will not live in the property. I know, everything we have talked about sounds to good to be true, but it doesn’t stop there. With FHA you can use a co-borrower to help you qualify for the loan and they do not even have to be intending to live in the new property. Adding a co-borrower to your loan can help counteract for poor/limited credit history or maxed out debt-to-income ratios. Adding a co-borrower is a great way to qualify for a home you may not have been able to qualify for before.
Homebuyers with at least 3.5% of the purchase price of a property will also need to:
-Provide a valid Social Security number
-Proof of U.S. citizenship, evidence of legal permanent residency or eligibility to work in the U.S.
-Be of age to sign a mortgage contract under your state’s borrowing laws
-Purchase a one- to four-unit property (can be an approved condo or town-home)
-Reach out to a trusted Mortgage Loan Officer to guide you through the process
To find out if you qualify for a FHA Loan today fill out our Quick Quote form on the top right of this page and one of our FHA specialists will reach out to you ASAP.