It’s exciting buying a property, and we are excited to help you with the financing. If you are either buying the property for you and your family, or for investment purposes, here is some information that should help you understand what’s out there in terms of products:
Down Payment:
If you are buying the property for yourself or your family then:
- 0% – You can buy a property with zero down if you are an eligible veteran
- 3% – FHA loan or Fannie Mae or Freddie Mac’s program.
- 5% to 15% – Typically require you to obtain mortgage insurance or you end up with an interest rate that is effectively a little higher.
- 20% – the amount required to avoid mortgage insurance on a fannie mae or freddie mac type of loan.
If you are purchasing a residential property for investment purposes then:
- 15% – is possible through an institutional lender if you have a credit score or 700 or higher.
- 20% – is possible through an institutional lender if you have a credit score or 600 or higher.
Credit Scores:
- 500 – This is what is typically referred to as, Non-prime, and would likely require 35% down-payment, and would be offered at a higher than normal interest rate.
- 600 – This score opens the door to GSE type loans like FHA and Va loans.
- 620 – Is usually the score needed to get a fannie, Freddie Mac type loan.
If you are purchasing the property for investment purposes, underwriting guidelines for Credit Scores are not as formulated, but factor in to the investor’s analysis of the property and the terms they are willing to offer.
Income:
If you are purchasing a home for yourself then you must show your ability to repay your loan. That is typically based on a 43% debt-to-income ratio. There are some products that will go as high as a 50% debt-to-income ratio.
If you are purchasing a home for investment purposes then the ability of the property to pay the potential mortgage and related property expense is analyzed instead of your ability to make the payments.