Frequently Asked Questions
What credit score do I need to qualify for my first home loan?
Lender guidelines have become extremely rigid as a response to the mortgage market meltdown of 2008, though we are starting to see those guidelines loosen a bit to accommodate borrowers who fall outside the standard parameters for credit, income structure, etc. Generally speaking, a middle FICO score above 720 will help you obtain the optimum rate and terms for a conventional home loan, though naturally there are a myriad of variations among lending sources. There are also several compensating factors (such as more money down, etc.) that can help you access a very aggressive loan program even if your credit score is lower than our averages.
How do my college or graduate school loans affect my chances?
Heavy debt of any variety can have very significant implications for borrowers looking to qualify for a home loan. Unfortunately, student loan debt in particular can be a real “Achilles heel” for younger borrowers looking to purchase a property, particularly in the common case of Federal Student Loan debt that is set up under an “income based repayment” program. These artificially low payments are wonderful for student borrowers in the initial stages of their careers, but they are a bit deceptive in the mortgage lending context. Lenders, as a general rule, will ignore the income-based student loan payment and instead use a fully amortized monthly payment calculation to qualify debt-to-income ratios. This can result in a loan denial even when a borrower appears to be comfortably handling their monthly obligations in a “real world” sense.
What are the costs associated with my loan?
There are a number of costs associated with closing a refinance or purchase transaction. In addition to lender fees, there are standard 3rd party closing costs (escrow, title, etc.) to take into account. There can also be additional “points” charged by the lender, either for highly specialized loan products or at the request of a borrower who wishes to secure a below-market rate.
As brokers, our compensation for the majority of transactions is generated by our wholesale lending source, and we are often able to eliminate the bulk of 3rd party fees. In any event, we are required by law to provide borrowers with GFE’s and Estimated Closing Statements detailing all fees associated with every loan we originate.