Are you a First Time Home Buyer with questions?
As a First Time Home Buyer, the options are plentiful, and the process can seem overwhelming. Let’s start by breaking down some of the loan products and what they are best used for.
First-Time Home Buyer Loan Mortgage Options in Texas
There are many types of first-time home buyer loans. You may select different loan options and terms such as a fixed rate or adjustable rate mortgage, and number of years to repay the loan from 30 years to 10 years. After reviewing your application and credit profile we’ll help you decide which option best fits your needs.
Types of Mortgages Loans to Consider:
- FHA Loans
Many consumers consider FHA loans to be the best first-time home buyer loan. The qualification requirements are lenient with only a 620 FICO credit score requirement, 3.5% down payment requirement, and flexible qualifications related to employment and income as compared to a conventional loan. They also allow down payment assistance, which is an attractive feature for some borrowers. The down payment can also be gifted from a relative or employer. Texas Premier Mortgage also offers reduced closing costs on these loans and many times can credit money back to cover the remaining closing costs saving you thousands of dollars in upfront costs. The FHA loan limit in Texas has increased to $472,030 for a single-family home and can vary depending on the county. This applies to all purchase and refinance FHA Loans in Texas.
- Conventional Loans
Conventional mortgages are best for those who can afford to pay a larger down payment and might have an excellent credit score. They also 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. The new 2023 conventional loan amount is $726,200.
- USDA Loans
Offer 100% financing and a great option for a specific client and area of purchase. USDA loans are 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.
- VA Loans
Offer 100% financing for active duty military members and veterans. 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.
- Jumbo Loans
Any loan that does not meet the conforming or FHA loan limits is considered a Jumbo Loan over $726,200. The FHA loan limits in Texas vary by county. We have a variety of options to choose from.
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. The current basic requirements to obtain an FHA loan are outlined below.
FHA Loan Requirements:
- Credit– With a minimum of a 620 credit score this might be a great option to consider. We will review your application for any past collections, bad debt, bankruptcies, foreclosures, tax liens, and judgments. 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. This money can be borrowed from family or employer, or a down payment assistance program. In unique circumstances, a higher down payment could be required depending on debt ratios or other delinquencies.
- Employment– FHA loans require 2 years of verifiable employment history. It is acceptable to have changed jobs in some instances as-long-as you stay in the same line of work or industry. For self-employed borrowers you must have the same business for 2 years.
- 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 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 on your specific purchase price and loan amount.
Conventional Loans for First-Time Home Buyers in Texas
Conventional loans could be a great option as well. They require a minimum of 3% – 5% down although you can put down more if able. 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%. Let’s review the requirements to see if it’s a good fit for you
Conventional Loan Requirements in Texas
A 620 credit score or higher is required to qualify as set forth by Fannie Mae and Freddie Mac. Higher credit scores could be required up to 680 if going for the 3% down payment option. The credit score requirements continue to change so make sure you call us to review your situation.
- Down Payment – The down payment requirement for a conventional loan is 3% for many first-time home buyers.
- Employment– 2 years of verifiable employment is required for a conventional loan. The required documentation to verify employment and income are a most recent paystub, W-2s for 2 years, and tax returns for 2 years. If you work for larger corporations, we have a streamlined process that would eliminate this checklist! We’ll help identify if you qualify for this loan options
- 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.
For more information about FHA loans, their benefits and loan options and how it may apply to you, please contact us direct or submit the “Quick Quote” form on this page.