As a First Time Home Buyer the process can seem overwhelming. To make it easier, start by breaking down some of the loan products and what they are best used for.
There are many types of first-time home buyer loans. There are different loan options and terms such as a fixed rate or adjustable rate mortgage. You can also choose the number of years to repay the loan from 30 years to 10 years. After reviewing your application and credit profile, our mortgage professional will help you decide which option best fits you and your family’s needs.
Types of Mortgages Loans to Consider:
- FHA Loans
FHA loans are considered to be the best first-time home buyer loan. The qualification requirements include a 580 FICO credit score requirement, a 3.5% down payment requirement. This loan is also more flexible with employment qualifications and income as compared to a conventional loan. The down payment can also be gifted from a relative or employer. Texas Premier Mortgage also offers zero closing costs on FHA loans, and many times can credit money back to cover the remaining closing costs saving you thousands of dollars in upfront costs.
- Conventional Loans
For those who can afford to pay a larger down payment and might have an excellent credit core, a Conventional Loan may be a good fit. Conventional loans usually offer better loan terms than FHA with no upfront MI – mortgage insurance to pay to the lender. The down payment mortgage options range from 3% – 5% down payment as a minimum requirement.
- USDA Loans
Is an excellent option for those who want to purchase a home in rural areas which we see on the outside boundaries of major cities, suburbs and other rural smaller communities in Texas. They are available for low income to moderate income borrowers. There are specific limitations on this and specific areas we will help you identify that qualify. There are many ways to structure your loan, so you get in the house for little to no money. This loan offers 100% financing.
- VA Loans
These loans are the best loans in America with no PMI – private mortgage insurance tacked on the monthly payment. The interest rates are also often lower than most loans and provide 100% financing making this type of loan very attractive to those who are active duty military members and veterans.
- Jumbo Loans
We have a variety of options to choose if your first home is a jumbo mortgage loan. Any loan that does not meet the conforming or FHA loan limits is considered a jumbo loan over $484,350 effective January 1, 2019. The FHA loan limits in Texas vary by county but, are generally $331,200.
FHA Loans for First Time Home Buyers in Texas
For many applicants, including those that do not qualify for a conventional loan, will likely find an FHA loan to be the best loan option. Below are the FHA loan requirements:
FHA Loan Requirements:
- Credit – If you have a minimum credit score of 580 this might be a great option to consider. Your application will be reviewed for any past collections, bad debt, bankruptcies, foreclosures, tax liens, and judgements. If none of these apply to you your credit should be just fine to qualify.
- Down Payment – FHA loans are a top choice for the minimum down payment of 3.5% down. The money for down payment can be borrowed from family or employer. Depending on debt ratios or other delinquencies, a higher down payment could be required.
- Employment – FHA loans require 2 years of verifiable employment history. It is acceptable to have changed jobs in some instances if you are in the same line of work or industry. For self-employed borrowers you must have the business for 2 full years in order to qualify.
- Debt-to-Income– The debt to income is an evaluation of your income compared to your debts + new mortgage payment being factored in. The bank wants to see you can afford the new home without going broke or being put in a financial hardship in the future. This is known as your “debt-to-income ratio”. FHA loans allow a maximum DTI ratio of 43%, however with compensating factors we can go well above this and have helped many clients get approved over 50% debt ratio.
- Property–Is the property in good condition or bad condition? This includes basic standards of living conditions that must be met, which ensures both a safe and healthy home to live in, and to ensure the banks appraised value is an acceptable collateral in case of default.
- Mortgage Insurance – All FHA loans are required to carry mortgage insurance and monthly PMI – private mortgage insurance. The upfront MI is factored in your loan amount and has no bearing or impact on your down payment amount. We’ll help break this down based off your specific purchase price and loan amount.
Conventional Loans for First Time Home Buyers in Texas
Conventional loans require a minimum of 3% – 5% down. You do have the choice to put more down if you would like to. A huge advantage of this loan for the long-term buyer is the PMI – private mortgage insurance will be removed after you pay the loan down to 80% of the purchase price. PMI is an extra monthly fee paid to the bank each month if you put down less than 20%.
Conventional Loan Requirements in Texas
Fannie Mae and Freddie Mac require a 620 credit score or higher to qualify. Higher credit scores could be required up to 680 if going for the 3% down payment option. Credit requirements often change, so be sure to check with us on the newest requirements.
- Down Payment– We have a great program in which down payment requirements for a conventional loan is 3% for many first-time home buyers.
- Employment– Two years of verifiable employment is required for a conventional loan. 30 days paystubs, W-2s for 2 years, tax returns for 2 years, and photo ID are the required documents needed for a conventional loan.
- Private Mortgage Insurance– Any loan that does not have a 20% down payment will require PMI – private mortgage insurance. This is a monthly fee paid to the lender. Once your loan is paid to 80% of the purchase price this extra monthly fee can be eliminated.
Written By: Steve Head / Top Producing Loan Officer / https://www.txpremiermortgage.com/
For more information about our portfolio of loans, their benefits and loan options that apply to you, please contact us direct at 281-627-4222 or submit the quick quote form on this page.