What is the hardest home loan to get?
Conventional loans are traditionally tougher to obtain than government-backed mortgages, and that's still pretty much the case today. Conventional lenders are generally looking for a credit score of at least 740, which is higher than the typical minimum score required for government-backed loans.
Government-backed loan options, such as FHA, USDA and VA loans, are typically the easiest type of mortgage to get because they may have lower down payment and credit score requirements compared to conventional mortgage loans.
Jumbo mortgages are large loans that fall above the federal loan limit. These loans are typically harder to qualify for than conforming loans, but they can offer competitive interest rates.
Getting a mortgage can be a challenge, even in the best of times, with piles of required documentation, repeated verifications of things like employment and assets, and very strict rules about how much debt you can carry.
Federal Housing Administration (FHA) loans need at least a 580 FICO Score with at least a 3.5% down payment (which amounts to $10,500 on a $300,000 home). Conventional loans require a minimum FICO® Score of 620 along with a 3% down payment (which amounts to $9,000 on a $300,000 home).
Let's begin by looking at the major factors lenders first consider when they decide whether you qualify for a mortgage. Your income, debt, credit score, assets and property type all play major roles in getting approved for a mortgage.
Lenders care more about your debt-to-income ratio than your income level. So someone with low income but no monthly debt could have an easier time getting approved than someone with high income and large monthly debt payments. Lenders also want to see a consistent income history.
The sort of mortgages that can be assumed nowadays are generally government-backed or -insured loans, including: FHA loans: For FHA assumable mortgages, you'll need to meet standard FHA loan requirements. These include being able to make a minimum down payment of 3.5 percent with a credit score of at least 580.
Credit score and mortgages
The minimum credit score needed for most mortgages is typically around 620.
FICO ® Scores are the most widely used credit scores—90% of top lenders use FICO ® Scores.
Which mortgage lenders don t look at bank statements?
For most residential mortgages, lenders typically ask applicants to provide bank statements for the past three months. However, some lenders including Santander, Halifax, and Virgin Money have informed applicants that they no longer need bank statements in 2024.
The upshot is that if you're over the age of 62, you're almost 30% more likely to get rejected for a standard mortgage.
Negative Credit Report
If you have derogatory marks on your credit report, such as missed payments, late payments, bankruptcies, etc., your chance of obtaining a loan is minimal at best. If you have a black mark on your credit report, you can contact the reporting entity and ask them to have it removed.
You may be wondering how often underwriters denies loans? According to the mortgage data firm HSH.com, about 8% of mortgage applications are denied, though denial rates vary by location and loan type. For example, FHA loans have different requirements that may make getting the loan easier than other loan types.
A $300,000 house, with a 5% interest rate for 30 years and $15,000 (5%) down will require an annual income of $77,087. This calculation is for an individual with no expenses. Use the calculator above to determine the income you need to purchase a $300,000 home.
Following the 28/36 rule, you should make roughly triple that amount to comfortably afford the home, which is $72,000 annually. Keep in mind that these calculations do not include the cash you'll need for a down payment and closing costs.
How much do I need to make to buy a $300K house? To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.
The best option for you depends on your specific circ*mstances. If you lack credit history or have poor credit it may be easier to get a loan from a private lender. If you have a good credit score or an established relationship with a bank, you will likely qualify for better lending terms.
The Three C's
After the above documents (and possibly a few others) are gathered, an underwriter gets down to business. They evaluate credit and payment history, income and assets available for a down payment and categorize their findings as the Three C's: Capacity, Credit and Collateral.
Mortgage lenders have become much stricter with their requirements, which makes it more difficult and confusing for buyers to qualify. In the past, borrowers could get approved with lower credit scores, but now they require at least a 700 credit score and a down payment of about 20%.
Can you get denied a mortgage after being pre-approved?
Mortgages can get denied and real estate deals can fall apart — even after the buyer is pre-approved. If you're aware of the pitfalls, you'll reduce the chance it can happen to you!
In addition to reviewing credit histories and assessing the ability to make a down payment, banks and lenders often review their applicants' employment histories. Lenders want to ensure that borrowers can afford to make regular mortgage payments.
For which buyer would a lender most likely approve a $200,000 mortgage? A person with a credit score of 760 with a small amount of debt who has had steady employment for many years.
Conventional loans have higher minimum credit score requirements than other loan types — typically 620 — and are harder to qualify for than government-backed mortgages. Borrowers who make less than a 20% down payment are typically required to pay private mortgage insurance (PMI) on this type of mortgage loan.
Most conventional loans cannot be assumed by a new borrower. In many cases, depending on current interest rates, assuming an existing loan can pay off for the buyer with fewer costs and a lower mortgage payment.
