As you know, when you start talking financing, there are multiple options, and you may qualify for one or more. The key is to figure out which one works BEST for you! Here’s the breakdown.
Conventional- Often the least expensive form. But also has some of the tougher qualifying standards. Loans to $484,350 with as little as 3% down. Typically, it’s the best option if you have 20% or more to put down.
FHA- Common in this market. Despite water cooler talk, not just for first time home buyers. More flex qualifying requirements than other forms. Loans to $314,827-343,850 (depending on county) with as little as 3.5% down. The 203k option allows borrowers to finance not only the purchase of their new home but also upgrades and improvements!
VA- Designed as a benefit for veterans. Eligible veterans and some spouses only. Zero down payments and no mortgage insurance premiums make this an attractive option. Loans to $484,350.
RD- For rural home buyers. Income and geographical restrictions apply. Zero down and no mortgage insurance. Loan limits vary by county but run in the 2-300k range.
Jumbo- These loans are for properties where Conventional loan limits just aren’t enough. Requirements and down payments will generally approximate Conventional guidelines but may vary.
Contract- Also known as “Seller Financing” and somewhat similar to “Rent-to-Own”. Has the most flexible requirements, making it the “go to” form of financing if the buyer has credit, job or income issues that would get in the way of qualifying for other loan types. Also used when speed is a major factor, as these can be closed in less than a week where other forms take about a month. Down payments vary but, in this market, generally run 10% or more.
Sub-Prime or Non-Prime- A few investment firms have reopened this market. More flexible qualifying standards than other forms. Down payments and loan limits will vary depending on a wide range of factors.
Indiana Housing- There are a number of programs available, and they often carry income or property restrictions. Down payments can be as low as zero. Loan limits typically follow either FHA or Conventional.
Construction/Construction-Perm- Used for (you guessed it) financing the building of a new home. Loan limits and qualifying requirements generally follow Conventional, Jumbo or FHA.
Lot Loans– Ok, make another guess. Yes, these are for buying building lots (including 10 acre size lots)
I know that was a lot to take in - Let us help! Email us
7 REASONS WHY YOU SHOULD GET PRE-QUALIFIED
There are LOTS of very good reasons why someone wanting to buy a house should get pre-qualified. Let's talk---
- Unless you're paying all cash or buying on contract, this step is a must do prerequisite to buying
- And even if you're going the contract route, it will improve your negotiating power.
- Most importantly, a pre-qualification letter is required before most offers will be accepted.
- It really doesn't expire (although after a couple of months, it may need updating).
- There's rarely a cost to do it.
- There's no penalty to your credit score.
- It let's you shop with confidence, knowing how much house you can buy and what your actual payments will be.
I have worked in the mortgage industry for 17 years and still has strong contacts. We recommend only mortgage loan originators who have proven themselves with dozens of our clients over many years time. Give me a call at (317) 625-0655 so we can started!
Send Us Your Home Buying Questions
In addition to credit scores, credit reports, job history and other factors, one of the key qualifying items is Debt-to-Income ratio, or simply, Debt Ratio. Every loan program has its own qualifying number, and many lenders have their own numbers as well. The allowable ratio may be more or less depending on factors such as credit score or how large or small your cash down payment will be. Debt Ratios are calculated by dividing your monthly debts by your monthly income. Here are some of the items that go into the calculation:
DEBT:
- Mortgage Payments
- Loan Payments
- Auto Lease Payments
- Minimum required payment on credit card(s)
- Child Support
- Other
INCOME:
- Gross salary or wages, pensions, Social Security
- Average commissions and/or bonuses
- Net rental income
- Net self-employment income
- Other
Here are some fairly common qualifying Debt Ratios:
| Conventional Loan | 50% with automated underwriting approval |
| FHA Loan | 56.99% with automated underwriting approval 43% with manual underwriting approval |
| VA Loan: | 55% +/- with automated underwriting approval 41% with manual underwriting approval |
| RD Loan | 45% |
| IHFA Loan | 45% |
But to get to the bottom line and learn how much house you can qualify to buy, give me a call at 317-625-0655 or shoot me an email today.
