Conventional financing is the ideal loan option for people with good credit. There are many options of down payment amounts, the lowest being 3%. There are also some guide first time home buyer programs that have even lower interest rates and/or lower mortgage insurance to help more people enjoy the benefits of homeownership. Some of these programs require you to take an online class that’s about 1 hour long and can cost up to 75$, but the monthly savings you get from taking the class pays for itself typically within the first two months.
Many times we can go up to 50% Debt to income ratio for loan approval. Debt to Income ratio is really simple, we just divide your monthly debt obligations by your gross monthly income and we get your Debt to Income Ratio or DTI. For an example, let’s say you currently have $500 a month in debt obligations towards a vehicle payment and a credit card, and your income is $4000 a month. If you qualify for a loan program that goes up to 50% DTI, then your monthly mortgage (including taxes and insurance) could go up to $1,500 a month. We add the $500 a month to the $1,500 a month for a total of $2,000 divided by $4,000 a month and we get 50% DTI. Your credit score also plays a significant part in finding the right loan program for you. Interest rates are on a tiered system, so the better your credit score is the lower the interest rate you can get. There is always the option to buy the interest rate down by “paying points” and that’s something to consider when you’ve been saving for the home purchase but you’re really concerned about keeping the monthly payments affordable.