You found your dream home, settled in, and suddenly, 25 years (or more) have passed! Your life is dramatically different now, and you want a home that reflects it. As any veteran homeowner knows, there’s one major obstacle standing between you and your dream home: applying for the mortgage. Don’t worry, though! It’s just like riding a bike—and you don’t even need a helmet.
In the early 2000s when the housing market was booming, it didn’t take much to get approved for a mortgage. Now, after the nation has finally recovered from the housing crash, recession, and banking crisis, the criteria for loans has become a bit more rigid—even in comparison to the 1990s. Though the process itself hasn’t changed much in the last quarter century, obtaining a mortgage does look a bit different.
When it comes to applying for a mortgage, there are a few major factors that lenders will consider.
Lenders usually rate your ability to pay off the loan through a combination of W-2 documentation, recent pay stubs, bank statements, tax returns, and your credit score. These references help the loan officers determine not only your ability to pay back the loan but also the likelihood of your fiscal responsibility.
Most mortgages require a 5 to 15% down payment, but there are some specialty loans, such as VA and USDA loans, that are obtainable with lower down payments.
While in the past, it was possible to obtain a mortgage with a 50% debt-to-income ratio, many lenders today limit borrowers to a housing payment that’s of 31 to 33% of gross monthly income and an overall debt of 43 to 45%. Higher credit scores, extra down payments, and cash reserves may allow some wiggle room in this area.
If you or your partner are over the age of 62, then you also have access to a different type of mortgage known as a HECM. For many seniors, the HECM loan can be a practical way to purchase the home of your dreams while still enjoying the lifestyle you’ve pictured for your adult years. The HECM option does require that you meet with a HUD-approved HECM counselor to discuss important conditions of your loan. With proper assessment and advice, you can determine whether this option is the right decision for you as you prepare for your next step!
If you’re ready to move into the home of your dreams, contact the experts at Epcon. Gorgeous houses, fantastic amenities, and loads of community advantages make our neighborhoods the perfect spot for your next home. Contact us to learn more!