Getting Started With Home Loans

Buying a home is certainly one of the biggest investments you will make during your lifetime. Selecting the right home loan from the beginning can make all the difference in the long term. While there are numerous factors to consider, our role here at My Home Loans is to make this process go as efficiently as possible. Having the knowledge and experience to back our practice, we’re proud to consistently assist first time home buyers with the advice they need to make a smart decision and avoid potential long-term risks. We specialize in providing home loans for anyone looking to buy a home in the El Paso area, whether you’re a first time buyer or buying your third home.

Recommendations For First Time Home Buyers

As a first-time home buyer, there’s a lot to be excited about. While feelings of excitement are easily washed away by the panic of getting approved for a home loan, we’re here to help you stay focused and make this process go as smoothly as possible. One way you can begin exploring mortgages today is to review your current financial situation and how a mortgage will play a role in your overall expenses.

Begin by reviewing the following:

• Consider your monthly payment. You’ll want to make sure your monthly mortgage will still allow you to have enough money for necessities including electricity, water, food, car expenses, and other basic needs.
• Determine your down payment. A higher down payment can help you avoid a higher interest rate, which will allow you to save more money down the road.
• Evaluate your liabilities and assets. Even if you don’t have debt beyond student loans, you’ll want to explore how your monthly income will be divided once you have a mortgage.
• Review your credit score. Your credit score will be one of the biggest determinants in qualifying for a loan but it’s not the final say. There are home loans for all credit scores. A 580 is often the minimum requirement.
• Receive free advice. This is where we step in. Our role as a home loan provider is to provide all the upfront information you need to make an informed decision. We’ll help you explore a loan that best matches your unique situation.

Home Loans to Consider: Traditional and Jumbo Loans

What Are Traditional Home Loans?

Also referred to as ‘conventional loans’, a traditional home mortgage allows the borrower to select from different options when it comes to the terms of the loan. This includes short-term adjustable-rate mortgages as well as fixed rates and the percentage of a down payment. Most traditional mortgages require anywhere between 5 and 20% of a down payment. To qualify for a traditional home loan, the minimum credit score is often a 700 but could be as low as 620. Additionally, the debt-to-income ratio is usually less than 30% but this can change as well. One of the advantages to traditional mortgages is that the application process takes less time than that of a Federal Housing Administration (FHA) Loan or a Department of Veterans Affairs (VA) Loan. Most applications are approved within 21 days or less.

Qualifications for traditional home loans include:

• A credit score of at least 620.
• A minimum 5% down payment.
• If less than 5% of a down payment is paid, then Private Mortgage Insurance (PMI) will be required.
• The debt-to-income ratio should be less than 30% but this varies.

The takeaway: Traditional home loans are ideal for people who have a high credit score and have saved a 20% down payment. Conventional loans allow borrowers to have greater flexibility compared to FHA loans.

What Are Jumbo Home Loans?

A jumbo loan is a larger than average mortgage used to purchase expensive homes in popular real estate markets. Often referred to as non-conforming loans, these loans tend to come with higher risks for lenders because they are not guaranteed by Fannie Mae and Freddie Mac. They may come with an adjusted interest rate or a fixed rate, depending on the terms. You typically want to take out a jumbo loan when you need a higher amount than that of traditional or federal conforming loan. In Texas, the current threshold of jumbo loans is $453,100; however this amount may vary.

Qualifications for jumbo loans include:

• A credit score of 700 or higher. Exceptions can be made to this where the score could be as low as 680.
• Your income will be considered. Typically the debt-to-income ratio is capped at 45%.
• The amount of money you currently have in the bank will also be considered as proof of sufficient money for one full year of mortgage payments.
• Some lenders will also request documentation of tax returns such as W2s or 1099s during the application process.
• A second appraisal of the home may be required to purchase the home.

The takeaway: Jumbo loans are good for those needing a larger than usual down payment and an overall larger loan. They should be explored when traditional home loans aren’t sufficient for your home loan needs.

Contact Us Today

Whether you’re buying a home for the first time or looking to purchase additional property, allow us to help you navigate an often confusing but significant part of the process: applying for a home loan. At My Home Loans, we match individuals with home loans that best meet their situation with the intention of giving them the capacity to purchase the home of their dreams. We believe you are more than a number and therefore deserve to be treated with personalized attention. Contact us today to schedule a free consultation.