Is it hard to get a home loan now?

[specs]

Guy at work said you gotta bring 20% down these days to get approved now- any truth to that?

Should of asked him to be abit more specific on that. Alot of lenders don't require that much of a deposit for a loan, perhaps he was lacking some other requirements which is why he had to fork over 20%.

If you're looking to get a loan, you should go sit with an agent or call around asking what the requirements are..

[SVT Lurch]

Thanks for the kind words guys, I appreciate it. Rather than multi-quote everyone I'm just going to try and summarize the current guidelines as a response.

Primary home (where you will live):
Conventional: 5% down is the minimum (must be your funds), but you must put 20% down to avoid getting a 2nd lien or mortgage insurance. 620 minimum credit score.
FHA: 3.5% down (can be a gift from a blood relative). 640 minimum credit score (for me - brokers will go down to FHA's 580 but we have not successfully closed one so I say it is 640).
VA: 0% down (and sometimes $0 at closing), but you have to be a veteran. 620 minimum FICO.
USDA: 0% down, but has location, income, and credit restrictions. I think this is 620 as well, but I have not checked in a while. Let me know if you need to know and I'll find out.

Second home (lakehouse, ski condo, etc. - you will occupy at least part of the year):
Conventional: 10% down is the minimum, but 2nd lien guidelines are VERY strict and the mortgage insurance is expensive so I would recommend 20% down if you can swing it. 660-680 minimum FICO score required.

Investment home (rental property):
Conventional: 20% down is the current minimum, but the rate is atrocious (and you typically have to pay points). If you put 25% down the rate is much better and can be had without paying points to buy down the rate. You can go down to 660, but the rate is so bad you'll end up paying multiple points - I'd recommend a 700 or higher for this. Most investors limit you to 4 financed properties right now. Fannie Mae will go up to 10 and we have one investor that will do it, but the underwriting is detailed so you better be squeaky clean.

The basic rule for pre-approval is you want to be under 40% of your gross (pre-tax) income. That's all your debt (car payments, credit cards, student loans, etc.) divided by your gross monthly income equals your debt ratio. You can go over 40% depending on credit, assets, and a number of other factors, but 40% is a good baseline.

The $100 down is probably a HUD foreclosure - they'll do the FHA loan for you, but there's a list of houses on their web site and those are the only ones that qualify.

This is my opinion (backed by numbers), but there isn't anything wrong with mortgage insurance. The conventional numbers have come down quite a bit in the past few months and are now about half of what FHA loans are (as opposed to the reverse two years ago). You can also buy it out (as mentioned) with a single premium paid at closing (lender can pay by raising the rate slightly or you can pay out of pocket) and then you do not pay it monthly. It's a great help if you do not plan to be in the house for the life of the loan because the payment is lower despite the higher rate. The factor (how much you pay) drops at every 5% mark (95%, 90%, 85%) and is cheaper on a 15 year or shorter term.

We should have Oklahoma back in a week or two.

Unfortunately there is still a lot of bad information out there. The good news is the number is bad lenders has dropped (33,000 loan originators in Texas in 2007 down to about 11,000 now - figures I was told in 2011). The information above is free and accurate as of right now. Guidelines do change pretty often, but those numbers haven't moved in a while and will at least point you in the right direction to get started. As it's been mentioned several times - get referrals (for this or for anything you're going to pay money), it will save you headaches later.

[Chas_svo]

Good info Trey.

This should be a sticky.

[TexasT]

The $100 down is probably a HUD foreclosure - they'll do the FHA loan for you, but there's a list of houses on their web site and those are the only ones that qualify.

It was a hud foreclosure that we purchased. One thing I would like to point out is that this place needed some elbow grease. I did some plumbing, did a bunch of stuff to get the pool cleaned up, it was missing seven doors including the back door. While these "homes" do need some
it got us in for very little down and into a home that we never could have qualified for if it was all finished and painted. I think is is a great deal if you are able to do the work yourself.

It is not for everyone.

[SVT Lurch]

Good advice.

[bucky]

Great info that should be read by everyone contemplating a loan right now. I always had trouble with obtaining VA loans. Supposedly, you have to have served during certain times and meet certain criteria for active duty time served. I always found it easier just to put the 3.5 down and go FHA.

One thing i am predicting is rates are close to bottoming out. I think we will start to see a slight uptick in them next year. If you are to get an FHA right now for <4 % it makes it nice in the future if you need to sell and its assumable in case rates have risen back to past norms.