People often reach out to us with questions about researching neighborhoods and schools in Colorado Springs, but recently we’ve had a lot of people asking us: how much home can I afford? If you’re just beginning to consider purchasing a home or you’re committed to buying in the near future, this is a very important factor because you need to know how much you can afford before you begin house hunting.
There are many personal financial elements that affect how much a mortgage company will lend to you. We highly recommend that you speak to a lender. With no obligation at all, they can calculate how much you might qualify for based on your specific circumstances. Qualifying for a loan is a very personalized process so it’s vital to talk to an expert who can analyze your personal situation.
But what happens during that initial conversation with a mortgage company?
We spoke with local lender, Kim Majors, to get the latest information on loan specifics and an idea of what you will discuss with a lender when you call. Here’s what she had to say:
- There are many variables in looking at the amount you will qualify for:
- Loan type and loan program
- Credit score
- Down payment amount
- Monthly liabilities
- Monthly income
- Specific expenses related to the property (taxes, insurance, Home Owners Association dues)
- The best thing to do is to speak with a lender. Initiating the pre-approval process leads to absolutely no obligation to buy and it is just a starting point. A lender is there to help you figure out what you can qualify for and what loan type is best. It is completely free to get pre-approved and leads to no obligation
- Working with a lender to get pre-approved will also provide you with an estimate on payments, and help you figure out what purchase price range you want to be in. This will help focus your home search efforts. A lender can also help you calculate how much cash you will need. Remember there are great programs out there to help with down payment assistance so you can get into a home with very little money.
- Want to speak with Kim? Give her a call (719) 522-6953 or email email@example.com.
Related Reading: Steps to Buy a Home
Here are some basic requirements for the various loan options as of August 25, 2020 (Need today’s requirements? Reach out to your lender as these guidelines can vary from lender to lender!). This is definitely a moving target right now with COVID because guidelines have been changing. Please know this is always subject to change at any time:
- FHA Loans: minimum credit score 620, minimum down payment 3.5%.
- VA Loans: minimum credit score 620, typically no down payment requirement unless eligibility is tied up with another property. In this case, there COULD be a down payment requirement.
- Conventional Loans: minimum credit score 620, minimum down payment 3-5% down payment depending on qualification.
- Down Payment Assistance Loans: minimum credit score 620-660 depending on the program. Minimum down payment for FHA 3.5% and for Conventional 3%. Down payment assistant programs offer either a grant that does not have to be paid back or a Silent Second Mortgage. A Silent Second Mortgage sits with no payment or interest but does have to be paid back when the homeowner sells or refinances. In some programs the Silent Second is partially forgivable. These programs provide a grant or Silent Second in the amounts of 3%-5% of the loan amount that can cover some or all of the down payment requirement and possibly some of the closing costs. One of the programs does require you contribute at least $1000 of your own funds into the transaction.
- Please also know these rules are not hard and fast. Every scenario is different and lenders have to look at the qualification piece as well. Just because someone has a credit score of 620 and 3% doesn’t necessarily mean they will qualify if that makes sense. Every situation needs to be reviewed in detail.