Loan Requirements for Buyers
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Loan Type | Owner Occupied | Min Down Payment | Max Loan Amount | Term (years) | Rate Type | PMI | Minimum Credit Score | Max Debt-to-Income Ratio |
|---|---|---|---|---|---|---|---|---|
FHA | Yes | 3.50% | Single: $816,500
Duplex: $1,045,250
Triplex: $1,263,500
Quadplex: $1,570,200 | 15, 30 | Fixed | > 80% LTV | 580 | 55% |
VA | Yes | 0% | $787,750 | 15, 30 | Fixed | - | 600 | 55% |
CHFA 1st Time Homebuyer | Yes | 3% | $766,550 | 30 | Fixed | Yes | 620 | 55% |
Conventional - Conforming | Yes | 3% | $766,550 | 15, 30 | Fixed | > 80% LTV | 620 | 50% |
Jumbo | No | 15% | - | Variable | Fixed/ Adjustable | > 80% LTV | 700 | 43% |
Private Loan | No | 20% | - | 15, 30 | Adjustable | - | - | - |
Credit Score
Credit Score is a key metric lenders will use to gauge a buyer's likelihood of repaying their loan based on both their current debt situation, and their track record of paying debts in the past.
Example
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John gets paid twice per month, and each check is $4,000 BEFORE healthcare, taxes, 401K, etc.
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John has a car payment of $200 and pays $500 per month for student loans
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John is applying for a loan with a total monthly payment of $2,000 including taxes and escrow payments
His debt-to-income ratio would be:
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($200 + $500 + $2,000) ÷ ($4,000 x 2) = 0.45 or 45%
Debt-to-Income Ratio
Your debt-to-income ratio tells you how much of your gross monthly income is spent on debt payments each month. Lenders use this to gauge your ability to pay the mortgage.
Private Mortgage Insurance (PMI)
PMI (or MIP for FHA loans) is insurance the buyer pays that protects the lender in the event of a default. It typically applies whenever a buyer is making a down payment of less than 20%.
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Down Payment, LTV, Credit Score, Loan Type, and Loan term are factors that impact the cost of PMI.
PMI FAQs
Can Mortgage Insurance be cancelled?
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PMI can typically be removed once the loan balance is less than 80% of the home's value
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MIP must be paid on FHA loans for the life of the loan if the down payment was less than 10%
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If the down payment was more than 10%, MIP can be removed from an FHA loan after 11 years and the loan balance reaches less than 78% of the home's value
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How much does PMI cost?
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Buyers typically pay 0.3%-1.5% of the loan amount each year, divided into monthly payments that are added to the mortgage
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FHA loans also pay an upfront 1.75% premium at closing, which can be rolled into the loan rather than paid out of pocket
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