How to Qualify for a Home Loan

                         To qualify for an FHA Loanall applicants whose income will be used to qualify for                                              the loan must have a minimum middle credit score of at least of 620 to 640. (The exception being a non-participating applicant)                                                                                                                          

To qualify for a Conventional mortgage again all applicants whose income will be used to qualify must have a minimum middle credit score of 620 and higher.

Most lenders pull a “tri-merge” credit reportwhich contains credit scores from the three major credit bureaus.They will use the middle score to qualify you. So even if you’ve got a great “high score”, it’s your middle score that’s ultimately used to determine financing terms and eligibility. They 'll also review your credit to eliminate fraud and any possible mistakes or omissions made by an alternative credit reporting provider.

Another important issue to consider is that the middle score of the “primary wage earner”will be used. This can help or hurt you depending on who has the higher credit score. Lenders have a basic set of minimum standard requirements necessary for loan processing and approval. If the following criterion is not met, the odds of getting your home loan approved are slim to none:

Job/Income HistoryThe lender will look for at least 2 years of steady income in the same line of workfrom an employer. Your income may include; alimony, child support, SSI, and VA benefits. Social Security Income will be increased by 25% to determine the qualifying amount.  Income from part-time employment can only be used after 12 months on that job.

Credit HistoryYou don’t have to have perfect credit to qualify for a home loan. FHA lenders require a minimum “middle” credit score of *620-640.Conventional lenders are much more conservative requiring a middle credit score of at least 620- 640. Both are also looking for 3-4 open and active trade lines with a minimum 12-month history.

Down Payment- FHA lenders require a 3.5% down payment.The funds don’t have to come from your personal assets; they can come from an immediate family member in the form of a gift. Conventional lenders require as much as 3%-20% down based on your credit score. All of the funds must come from the borrowers own assets. In certain instances, the lender may allow gift funds as well.

Debt to Income Ratio-Lenders will want to see how your debt stacks up against your income. FHA lenders may go as high as 50% Debt to Income if the borrower has a good work history and has paid his or her debt as agreed. Conventional lenders will rarely allow anything above 43% debt ratio. 

Self-Employed Borrowers- Self-employed borrowers will have to provide 2 years of tax returns and a year to date financial statement.