Top Home Buying Myth

Did you know you don’t have to be entirely debt-free or have “perfect” credit to buy a home? 💰🏡💳

Yes, debt is a factor in the loan eligibility equation, but the lender is actually looking at a combination of factors.

First, your mortgage lender will take a look at your debt to income ratio. This is the formula that will determine “how much house” you can afford.

After that, your lender will discuss with you your FICO credit score and what it needs to be to secure a higher-priced home/better interest rate. Depending on the type of loan, the requirements for your FICO credit score may vary.

For example, FHA loans require a minimum score of 580 for the buyer to be eligible for a smaller down payment (usually 3.5%), or a FICO® score between 500 and 579 for a slightly higher (often 10%) down payment.

From Whitehouse.gov, an FHA Loan is a mortgage that's insured by the Federal Housing Administration. They allow borrowers to finance homes with down payments as low as 3.5% and are especially popular with first-time homebuyers.

FHA loans are a good option for first-time homebuyers who may not have saved enough for a large down payment. Even borrowers who have suffered from bankruptcy or foreclosures may qualify for an FHA-backed mortgage.

As of February 2023 the Biden-Harris Administration announced an action that will save homebuyers and homeowners with new FHA-insured mortgages an average of $800 per year, lowering housing costs for an estimated 850,000 homebuyers and homeowners in 2023.

The Federal Housing Administration (FHA) reduced its annual mortgage insurance premium by 0.30 percentage points, from 0.85% to 0.55% for most new borrowers. (The mortgage insurance premium is the monthly fee that homeowners with FHA-insured mortgages pay to insure their mortgages, which they pay on top of their monthly principal and interest payments.)

This new initiative is set to go into effect as of March 20, 2023, and will be reflected in the President’s FY 2024 Budget.  

You can read more about this new initiative at the link HERE.