Credit Scores and Down Payments for Mortgage Loans
In today's mortgage and real estate market, two of the most common questions we receive are, what type of credit score do I need to purchase or refinance a home. And what type of down payment do I need to purchase a home. The answer is, it depends on the type of loan you can obtain, what type of property it is and whether you plan on living in the home or renting it, among other things. As always, this information is subject to change, but here is a brief synopsis of where we sit in the current market.
Credit Scores: First, one of the most important issues to consider is your credit score. We have written articles in the past which can be read on our blog about keeping good credit and improving your credit score and will provide more information in the near future as the scoring models change. But, the credit score you need will depend upon the type of loan you obtain.
The minimum score you will realistically be able to obtain financing with in this market will be a 620 fico score. With a 620 credit score you will be able to obtain an FHA loan, a Veterans Administration (if you are active or retired military) or even a conventional loan. However, if you score is in this range, it will probably make sense to not obtain a conventional loan as it will be pricier for a fico in that range.
Instead if you are looking to obtain a conventional loan, to obtain the most ideal rates you will now need a 740 fico, with good rates still available, but not the lowest available at 740, 720, 700, 680, and 660 and down to a 620 fico.
Down Payments: Next you must consider down payments for the type of loan you are looking for. The lowest down payment available is currently, nothing, as Veterans Administration loans do not require any down payment. These loans are of course for current or retired military with proper qualification however and only can be used for the home you will live in, no investment or second homes.
Then there is FHA mortgages which now have a minimum down payment of 3.5%. There are no restrictions on who can obtain an FHA loan and these types of loan even allow for someone not living in the home to help the buyer qualify, such as a parent co-signing for a child. However, these loans are again only for primary residences and no investment or second homes.
Finally, there are conventional loans. The minimum down payment for conventional loans will be 5% for a primary residence and even that is getting more and more difficult with 10% now becoming the norm. However, you can also finance second homes and investment properties as well through conventional loans, with a minimum of a 20% down payment required.
These are just some of the many factors to consider when purchasing or refinancing a home, but this should provide answers to two of the most common questions in today's market.
For more information on home purchase loan or refinance programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: email@example.com or online at www.strategicmtgaz.com