LTV

The Truth About Mortgage Qualification

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There are many reasons why people choose not to refinance, or purchase a home. However, one of the most detrimental reasons that I have heard during my time as a mortgage broker is: “I don’t qualify.” While this is sometimes true, I have often found that after a short discussion, things aren’t quite as impossible as they first thought. Many consumers are selling themselves short because they either don’t know, or have an incorrect view of DTI ratios, down payments, or credit scores.

This is a common misconception held by many people. In a recent study published by Fannie Mae, we see that only around one half of consumers had an understanding of key mortgage qualification criteria. For example, most people thought you needed a 652 credit score or better on the study. (It’s 620) (You can find the rest of the study here.)

While there are exceptions to every rule, here are some good general guidelines to follow in the event you aren’t sure whether or not you qualify.

The Minimum Credit Score required to refinance, or purchase a home is 620. (Though this shouldn’t discourage someone who wants to refinance or purchase a home, as credit repair is -in most cases-  a viable option)

The minimum down payment required is 3% (Though there are programs that let you put either 1% or 0% down)

Maximum DTI ratios: (DTI stands for Debt-To-Income) This one is a bit tricky because you’re dealing with two ratios here. For more info on DTI ratios, check here.
Front End: The highest you can go is 45% for FHA Back End: The highest that you can go on the back end is 55% for FHA loans.


Highest LTV: For a more detailed explanation of LTV please go here. Otherwise, in most instances it is 90% unless you have a VA or FHA loan.

Luckily for our readers, we've covered these subjects multiple times in the past.

So why the info? It is our hope that we can help the 55% of first time home buyers and 60% of repeat buyers who are interested in purchasing a home to not disqualify themselves out of a great deal that could save them hundreds of dollars each month.

For those who are curious as to whether or not they qualify, please feel free to get in touch.

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