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Mortgage Guidelines for First-Time Home Buyers


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TERMINOLOGY

Mortgage guidelines for first-time home buyers have changed over recent years. Lenders have become stricter and pickier about whom they lend money to. In order to ensure loan approval, you need to have everything in order before your application.

Credit

Credit is very important for the first-time home buyer. An FHA loan allows a lower credit score, sometimes as low as 580. Other conventional loans will require a mid 600 score or higher. You will get a better rate with a higher score also.

DTI

"DTI" refers to "debt-to-income" ratio. This is the amount of debt, including your proposed new mortgage payment, in relation to your income. This is usually going to need to be under 40 percent, with some exceptions. If you have a lot of debt, you will probably need to pay some things down before you apply for a mortgage.

Down Payment

The days of zero down are over. If you are a veteran, you can get a VA loan with no money down. Everyone else will need some cash. An FHA loan requires 3 percent down, and a conventional mortgage is going to need at least a 5 percent down payment.