Qualifying for a Conventional Loan
Conventional loans are backed by Fannie Mae and Freddie Mac, and make up the bulk of real estate finance in the U.S. Low down payments are available, with as little as 3%*, with good credit and employment history. Borrowers with less than perfect credit may qualify with a larger down payment. These loans have a maximum loan amount of $766,550.
In terms of qualifying for the loan, there are four areas to consider:
Credit
Credit history must be good. Prospective borrowers should review their credit report with scores from all three bureaus. This type of report can be obtained by contacting First Equity at 734-475-0270.
Income
Borrowers must have a stable source of income. 24 month employment and/or college history is needed. Some exceptions do apply. Although programs may vary, generally the total debt, including the new house payment, should not exceed 45% of gross (pre-tax) income. Income from part time jobs, bonuses or commissions can be counted if there is a 2 year history.
Reserves
Reserves are a liquid source of cash that a borrower can tap into in case of an emergency. Some programs may require cash reserves. Although reserves are not always required, sometimes having reserves can help a borrower qualify. The most common forms of reserves are IRA or 401K.
Collateral
The home being purchased will be appraised to determine fair market value. If the appraiser states in the report that there is a health and safety concern, then a contractor's inspection or repairs may be needed.
Legal Disclosure*: 30 year fixed rate Conventional loan-Interest rate 6.875% APR is 6.89%. Loan amount of $200,000 with no points and no junk fees. Monthly principal and interest payment is $1,313.86 and you will also pay 1/12 of property taxes and homeowners insurance with the monthly payment. Tax & insurance escrows may be waived for loans with 20% or more down payment. Loans with less than 20% down will pay monthly mortgage insurance with the payment. Assumes 80% loan to value (20% down payment). (As of 01/09/2024. Rates subject to change.)
We are here to help
Message us if you have additional questions, would like to get Pre-Qualified, or would like a quote. Let First Equity be your guide through the loan process.