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Loan Types

 

For many, homeownership means investing in the future. The equity you build is yours to keep and while it may be more challenging to buy a home early in life, owning a home offers the potential to help build a healthy future and peace of mind.

The first stage in applying for a mortgage is typically prequalifying for one. Your credit score determines your interest rate, loan choices and your minimum down payment. Ultimately, the maximum size of your loan amount will be determined by your debt-to‐income ratio (DTI), which is the percentage of monthly gross income that goes towards paying debts. In general terms, the lower your DTI, the more you may be eligible to borrow and the more financing options may be available to you.

It’s best to have information and paperwork ready throughout the prequalification and loan application process.

You will typically need:
• One or two W-2 forms
• Payment stubs and tax returns
• Records of your savings and investments
• Minimum two-year job history, which may include some college or university work in a related subject area
• Minimum two-year history of good credit
• Three or four trade lines on your credit report
• Demonstrated ability of paying bills on time

If you are self-employed, optimizing your savings, credit score, down payment; minimizing your debts; and maintaining an up-to-date profit‐and-loss statement is a good strategy. Your income will generally be computed using your past two tax returns.

By furnishing any and/or all of the documentation, an applicant is in no way obligated to accept the terms and conditions of the mortgage offered, nor does the borrower have to provide these documents to receive a Loan Estimate.

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Fixed-Rate Mortgage

With a fixed-rate mortgage, your interest rate stays, well, fixed for the life of the loan.

That means your principal and interest payments will also stay the same for all the years on your mortgage. Keep in mind, however, there could be slight adjustments to the total monthly mortgage payment if your property taxes or homeowners insurance change during your loan term.

A fixed-rate mortgage is a favorite among borrowers. You can typically lock in a competitive interest rate. Even if rates in the market increase, your rate won’t change unless you decide to refinance to a different one. With a fixed-rate mortgage, there’s also the benefit of lower payments that can be spread out over many, many years, which could help borrowers qualify for a larger loan amount.

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

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Adjustable Rate Mortgage

An adjustable rate mortgage (ARM), is a loan in which the interest rate varies according to a predetermined schedule. The initial interest rate will be fixed for an allotted period of time, after which it is reset periodically. For example, a 5/1 ARM locks in the current interest rate for five years. After that, however, the rate for that particular product will change based on a predetermined index + margin with a cap. ARMs could start with better interest rates than fixed-rate mortgages, in order to compensate the borrower for the risk of future interest rate fluctuation.

If you only plan to live in your new home for a few years, this could be a helpful option.

Benefits of an Adjustable Rate Mortgage:
• Potential to lock in a low interest rate and, if needed, sell your home before it rises
• Could offer lower interest rates than fixed-rate loans
• Rate adjustments could have caps to keep them from going too high
• Rates could possibly go down, saving you money

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

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FHA Loans

The popularity of FHA loans has skyrocketed in recent years. The federal government backs FHA loans so they have relatively competitive interest rates, less stringent underwriting standards and require smaller down payments. They’re particularly appealing to young, first-time homebuyers who lack substantial credit histories and cash reserves, especially since loan underwriters permit non-traditional lines of credit, like car payments and utility bills.

Down payments may be as low as 3.5 percent, gifted, and buyers don’t need financial reserves beyond immediate closing costs. Also, an applicant may co-sign with a non-occupant co‐borrower like a parent to offset many issues.

These loans are relatively easy to refinance and are relatively forgiving of bankruptcies and foreclosures. They simply require a two-year wait time following a discharge. However, be prepared for stricter appraisals, strict accounting of income, and lower loan limits. Also, FHA loans don’t work for investment and vacation homes and a spouse’s debts can work against you, even if the spouse doesn’t co‐sign.

Benefits of FHA Loan:
• Easy to refinance
• No cash reserve requirement
• Down payments may be gifted
• Relatively competitive interest rates
• Down payments as low as 3.5 percent
• Less stringent underwriting requirements
• Allows the buyer to co‐sign with a non‐occupant co‐borrower

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

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VA Home Loans

VA loans are a key benefit for U.S. veterans, offering competitive interest rates, no down-payment loans, no required mortgage insurance and less rigorous underwriting standards.

Benefits of VA Loan:
• Easy to refinance
• No down payment necessary
• No required mortgage insurance
• Competitive interest rates
• Less rigorous underwriting standards

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts
• Certificate of eligibility

Additional documentation may be requested.

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Jumbo Mortgage

With today’s low interest rates, jumbo loans have become increasingly popular. They allow some buyers to afford dream or luxury homes with larger, often non-conforming, mortgages at slightly higher interest rates than conventional loans. With fixed-rate jumbo loans, buyers can currently lock in competitive rates and stable monthly payments for years to come.

Jumbo loans generally exceed the limits of conventional, government—backed loans, which tend to be capped at $424,100 in Texas. Buyers must typically make a down payment of 20% to qualify for jumbo loans.

Benefits of Jumbo Loan:
• Enable buyers to apply for larger home loans
• More opportunity to negotiate fees and interest

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

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© Ascent Home Lending, LLC

NMLS 1031959 | 5600 W Lovers Lane Ste 211 | Dallas, TX 75209

Office: 214.353.7701 | Fax: 866.881.1779

Jonathan Doddridge, Residential Mortgage Loan Originator

NMLS 657641

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