Our team of lending professionals take the time to look at each applicant individually. With that in mind, the term “bad credit” is often different for different applicants. Generally speaking, it’s hard to obtain an approval for a mortgage if your credit score is below 600. However, there are certain mortgage types, such as Federal Housing Administration (FHA) Loans that allow applicants with scores between 500 and 600 to get the funds they need to purchase a home.

 Absolutely! A second home is simply another property that you own outside of your primary residence. For example, many people own second homes in their favorite destination city. This ensures that they have somewhere to stay when vacationing. Additionally, many people who live in areas with cold, harsh winters own a second home in a warmer location and spend their winters there. These properties are not rented out and are thus not an investment property.

Investment properties are those that are purchased with the sole intent of generating income. For instance, if you already own a home that you and your family live in, you may purchase a second single-family home that you rent out to tenants. Other examples of rental properties are office spaces, apartment complexes, and fix-and-flip properties that you purchase and then sell for a profit. Investment properties provide many tax benefits, which make them an attractive option for would-be real estate investors.

Private mortgage insurance is a tool that is used by lenders to help protect them against loans that are considered risky due to the applicant’s financial standing, or the amount of money being borrowed. The cost of private mortgage insurance generally falls between 0.58% and 1.86% of the overall loan amount each year.

While that percentage may seem small, it’s still considered an added expense that you will need to calculate when determining how much home you can afford.

Do I Have to Purchase Private Mortgage Insurance (PMI)?

You will be required to purchase private mortgage insurance, also referred to as PMI, if the amount that you borrow is more than 80% of the home’s appraised value. For example, if you’re purchasing a $100,000 home and you need to borrow $85,000, you will be required to purchase PMI.

There are multiple variables to consider when determining how much your down payment will be when purchasing a home. To a degree, your credit score, current income, and other personal financial factors can come into play. However, the most important factor when determining the size of your down payment is found in the type of mortgage that you apply for.

For instance, veterans who obtain a VA loan aren’t required to put any money down. Federal Housing Administration Loan, also referred to as FHA loans, only require a 3.5% down payment. Some lenders require a 20% down payment on conventional loans.

Our team can work with you to help you determine the best type of loan for you and walk you through the process of determining the amount of your down payment.

Some applicants come to us with a property already picked out. While we generally advise clients to get a mortgage preapproval before choosing a property, that’s simply not the way that things always work out. If you’ve already chosen a property, most lenders will consider some or all of the following factors before approving you for a mortgage:

Credit Score: Also referred to as your FICO, your credit score gives a lender a good idea about how reliable you are at repaying debts. It’s generally difficult to get approved for a conventional mortgage if your credit score is below 600. However, some loan types, such as FHA loans, make exceptions for applicants with credit scores between 500-599.

Current Loans: Understanding your current debt to income ratio (DTI) is a major factor in determining the amount of your down payment. If you have any current loans, that will be taken into consideration as a means of protecting the lender.

Down Payment Percentage: In some cases, the lender may consider the amount of your down payment when deciding whether or not to approve a mortgage for a certain property.