The Right Kind of Loan: All of the Basics About FHA Loans

December 2, 2021 by Martha Walters

Some people may need the help of a home loan in order to make their dream home a reality. Besides the fact that it will make things easier for them, in the long run, they will also be given a chance to manage their budget without spending too much on their chosen property.

The thing about loans is that there is often an overwhelming number to choose from, much so that any aspiring homebuyer would definitely have to analyze their picks in order to choose the best one for their current financial situation.

One of the most viable options for aspiring home buyers would be the Federal Housing Administration (FHA) loan. Provided by a lender and insured by the FHA, it is one that many people in Texas often tend to lean on. Sure, there are other types of loans and mortgages offered in that State, but this one definitely takes the cake, given that its features and technicalities are pro-homebuyers.

All of the Basics About FHA Loans

You wouldn’t find any other type of loan that will give more benefits than it should; that is why if you are curious to know more about it, we have listed a couple of FHA loans information that you may find interesting.

It Allows for More Loan Access. Unlike other types of loans that would require the borrower to have a very high credit score, FHA loans are more accessible, with a preliminary requirement of only 580 to qualify. This is done to support those who may be running on a tight budget and fazed with a lot of past debts that are still being paid as of now. The thing about FHA loans is that they are also recommended for first-time borrowers since they offer some of the most basic loan packages for buyers. Choose this if you are intimidated by other loans that ask for so much paperwork and strict credit score benchmarks.
Only Asks for Simple Requirements. There are times when people are intimidated to apply for a loan due to the strict paperwork needed for the approval and validation process. Not everyone has the time and capability to do all that, which is why FHA loans are the entry point for those who may only provide the simplest requirements for approval. Some of the most common prerequisites include a 3.5% down payment of the property’s sales price, proof of income and employment, mortgage insurance, and a debt-to-income ratio of 50% or below. Be sure to discuss the other requirements with your FHA loan provider for more information about these requirements.
It Is Multipurpose. Unlike other loans, an FHA loan actually has more than one specific use. Besides being utilized to avail a property, it can also be a payment for repairs, renovation, and upgrades. Now, you do not need to look far if ever you are short for cash, even on simple renovations. You may simply submit the simple requirements and be given an immediate loan for your household needs. Keep in mind that there may be further inquiries about how you will use the money, but such can be proven by providing all the necessary proof and documents.

Your Top Mortgage Broker in Dallas

FHA loans are your go-to choice if you wish to acquire an amount without going through the usual hassle of complicated mortgage approvals. Preparing the necessary requirements is one thing, but fulfilling the time-consuming and taxing tasks of gathering paperwork is another story entirely.

In such a case, approach your most trusted loan provider and ask about the details of their FHA loan. Trust us; it is better to go for the most practical choice rather than to waste time in an application that would only yield negative results.

If you are looking for a financial company that offers FHA loans in Dallas, look no further than our selections at New Frontier Financial. We are a full-service mortgage broker service licensed in Dallas and throughout the state of Texas, and we provide a wide range of financial choices that will greatly help you in your home buying goals. Contact us at (469) 886-8300, and let us discuss all your loan options.

What You Need to Do to Be Approved for a Bigger Mortgage

November 12, 2021 by Martha Walters

Given the increase in the prices of homes right now, it’s natural that you would want a bigger mortgage. Now is the best time to do so, too, while the rates are still relatively low, even for jumbo mortgages and other loans in general.

That said, not everyone can get bigger mortgages. To increase your chances of getting approved for one, Dallas mortgage brokers, Now Frontier Financial, Inc., offers some tips for you:

Show Lenders That You Have More Income

Having more earnings can undoubtedly help get approved for a bigger loan. Does that mean you need a higher-paying job, or do you need to get a raise? Not exactly. In addition to your primary source of income, you can also show proof of other sources of income like:

Investment dividends or interest
Income from rental properties
Child support or alimony
Money from part-time jobs or side businesses (as long as you’ve been earning from this for the last two years)

Pay Off Your Other Debt

When applying for a mortgage, your debt-to-income ratio will be checked by the lender. This is the percentage of your monthly income as compared to your minimum monthly debt payments. Ideally, your debt-to-income ratio should be no higher than 36%, though there are some lenders that still accept higher DTIs. You can improve your debt-to-income ratio by reducing your credit card balances using a balance-transfer card. You can also refinance your auto loan to make the payment lower. Better yet, consolidate your debt into an installment loan.

Improve Your Credit Score

When you have a good credit score, you have a better chance of getting a larger loan, and it could even be with a lower interest rate. That said, the increase in the loanable amount is just to a certain limit. To improve your score, avoid maxing out your credit and make sure that you always pay on time.

Raise at Least 20% Down Payment

If you are planning to buy a home and you are able to raise at least 20%, you won’t need to pay for private mortgage insurance, so you might be able to get a larger loan. If you still have cash left after the 20% down payment, you should consider paying the lender upfront. This will not only let you qualify for a bigger loan amount; you get to save a lot over time, too.

Apply for FHA, 7/1 ARM, or VA Loan

A hybrid loan like the 7/1 adjustable-rate mortgage allows you to borrow more than what you would with a fixed-rate loan for 30 years. For instance, the 7/1 ARM lets you pay a fixed rate for the first seven years, then the rate changes. If you are comfortable with an ARM or if you intend to sell or refinance the mortgage before the seventh year anyway, you could choose this option to enjoy the lower interest rate with the bigger mortgage.

Final Thoughts

When you need to get a bigger loan, you need to work on being eligible for one. By following the tips shared in this post, you are increasing your chances of getting approved for a larger amount of loan. Show lenders that you have a desirable income. Then pay off your debt, improve your credit score, and raise at least a 20% down payment, and it will be easier for you too. Of course, you can always consult with Dallas mortgage lenders to know what you can do to get approved for their loans.

If you want to know more about home loans, New Frontier Financial Inc. is a mortgage company in Dallas, TX, that you can reach out to. Our loan specialists can answer all your queries and help you get the financial solution that you need for your new home. Call us at (469) 886-8300 to know more about our services!

What You Need to Know About the FHA Debt to Income Ratio

November 4, 2021 by Martha Walters

Buying a home for the first time is an incredibly exciting process. However, you’ll have to make a lot of considerations, such as choosing a Dallas home loan and ensuring you qualify for it. The FHA loan, backed by the Federal Housing Administration, is geared towards first-time homebuyers due to its attractive terms and low down payment. For this reason, it’s a favorable option for those who don’t have a vast amount of savings to contribute immediately to their home purchase.

The great news about FHA loans is that they offer a lot of flexibility to borrowers, especially in terms of the required debt-to-income or DTI ratio. Borrowers can exceed 55 percent for their DTI and approach 50 percent for manually underwritten FHA loans. With this in mind, it is vital to choose the proper FHA lender since what they require will improve your chances of approval. Here’s what you need to know about the FHA DTI ratio:

Debts Included in the DTI Ratio

You’ll have to include pretty much debt payment in your FHA DTI calculation. These debts include the following:

Auto loan payments
Student loan payments
Mortgage payments
Credit cards or lines of credit payments
Taxes, insurance, and association dues on free and clear properties, including land
Alimony and child support
Payment for the new proposed mortgage
IRS and state income tax payment plans

Some debts do not report on the credit bureaus, which you must still have to disclose and count in your DTI ratio. Additionally, FHA does not consider loan payments against retirement funds in the FHA DTI ratio calculation. That means borrowing against a 401k for a down payment does not harm your qualification, but it lowers your asset. Be sure to consult a financial advisor before borrowing against your retirement account.

Calculating Your DTI Ratio for an FHA Loan

Once you’ve listed your debts and income, lenders calculate your DTI ratio with the two figures. The calculation is as follows:

Total housing payment plus any HOA dues ÷ calculated income

Here is a sample calculation:

$1,600 house payment ÷ $5,000 income = 32 percent housing ratio

Total debt to income ratio calculation:

$1,600 house payment + HOA dues + $1,000 other debts) ÷ $5,000 income = 52 percent total ratio

FHA Manual DTI Ratio Exceptions

The FHA DTI limits are 31 to 41 percent, although compensating factors can result in a higher figure. FHA manual guidelines permit up to a 40 percent housing ratio and a 50 percent total debt to income ratio. However, not many people know this, resulting in borrowers failing to enjoy a fair chance at homeownership.

To get an FHA DTI ratio exception, you’ll need high residual income, an energy-efficient home, minimal increase in housing payment, documented asset reserves, and ample additional income that isn’t included in effective income. Having any of these traits may allow you up to a 40 or 50 percent debt ratio, although it depends on your credit score.

Contact a Mortgage Specialist in Dallas, TX

Improving your DTI ratio will vastly enhance your chances of getting approved for an FHA loan. By using our guide, you can adequately prepare for your FHA loan application and get one step closer to achieving the dream of homeownership!

If you’re looking for an FHA loan in Dallas, Houston or throughout the state of Texas, let us know at New Frontier Financial! We are a team of mortgage brokers serving Texas and beyond. We can help you achieve your goal to purchase, refinance a home, or invest in real estate. Call us at (469) 886-8300 to find out more about how we can help!