How to Overcome Home Buying Obstacles When Buying Your First Home

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The biggest home buying obstacles generally involve the buyer and the property qualifying for a mortgage.

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Finding a Down Payment

Unless you’re independently wealthy or just won the lottery, you will probably need to get a mortgage. Only VA loans, available to veterans, let a buyer put down zero. All other loans require a down payment. The two most popular types of mortgages are FHA loans and conventional loans, which require minimum down payments ranging from 3.5% to 10% of the sales price.

Obtaining a Minimum FICO Score

The two magical numbers are 620 for FHA and 720 for conventional loans with mortgage insurance. If your FICO score falls below that number, you may not qualify for those mortgages. For conventional loans without mortgage insurance, your FICO can dip as low as 620, but the pricing is ugly. To find out your FICO score, you should ask your lender to run your credit report.

Meeting Lender Ratios

Most lenders expect a buyer to have a maximum 33% front-end ratio. This means your mortgage payment, plus taxes and insurance (PITI), cannot exceed 33% of your monthly gross income. If you earn $5,000 a month, the maximum PITI payment for which you may qualify is $1,650. The back-end ratio is trickier.

Receiving an Appraisal at Value

The Home Valuation Code of Conduct, HVCC, became effective May 1, 2009, and applies to all conventional transactions. Since January 1, 2010, it now applies to FHA transactions as well. It’s a well meaning process that is flawed.

Satisfying Loan Conditions

Underwriting can be frightening. An underwriter reviews the file and can make demands. These demands can include more documentation, a review appraisal and, even then, the underwriter could reject the loan for a variety of reasons. Best Plots and apartments developed by nbrdevelopers

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