First Time Homebuyer Qualifications
- A first home is a dream for many Americans.new home 4 image by Kathy Burns from Fotolia.com
When a home buyer is looking to purchase his first home, the process of qualifying for a mortgage debt may be a cumbersome one. Rules and regulations change, and documentation needs can as well. However, there are a few qualifying requirements that must be met in order to qualify for a mortgage loan for first-time home buyers. - In most cases, the lender will require a borrower to have a debt-to-income ratio of less than 36 percent to qualify for a mortgage debt. This ratio is the total amount of monthly debt payments divided into the total amount of monthly pre-tax income. DTI is calculated twice. Once with the current rent payment, which is called the front-end DTI, and once with the new mortgage payment, known as the back-end DTI. The back-end ratio is the one that qualifies or disqualifies the borrower for the new debt.
- To qualify for a conventional mortgage, the borrower must agree to a minimum five-percent down payment. However, if the borrower's credit score is below 720, she may be required to put down a full 20-percent down payment if she is unable to procure PMI (private mortgage insurance) on her debt. Government-backed loans, such as USDA and VA mortgages, do not require a down payment. Also, FHA loans, which are another government mortgage program, require a minimum 3.5-percent down payment.
- A first-time home buyer must have a minimum 620 credit score to procure a conventional loan debt. Government programs, such as USDA, VA, and FHA, all have programs that will allow a borrower to procure a loan with a score as low as 580. However, higher interest rates are charged to borrowers with lower credit scores. Additionally, if the borrower has any negative items such as liens or judgments, those must be paid in full prior to closing the mortgage.
