<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=591308824738648&amp;ev=PageView&amp;noscript=1">
Share

Minimum Mortgage Requirements for 2021, Simplified

By Vast Bank on 07.20.2021

If you’re aiming to become a first-time homebuyer this year, you’ll need to know the minimum mortgage requirements for 2021. While most types of mortgage companies look for the same requirements (like a good credit score, reliable employment, and acceptable debt-to-income ratio) the specific qualifications can vary greatly.  

(Note: The minimum mortgage requirements listed in the article may not directly relate to Vast Bank underwriting.)

Loan requirements can be confusing. Here’s a simple summary of the minimum mortgage requirements for 2021, broken down by type of loan:

A conventional loan is a mortgage that is not provided or insured by any government agency. You’ll need:

  • A minimum FICO score of around 640. 
  • A debt-to-income ratio at or below 45%. Applications with excellent credit (over 700) may be accepted with a higher debt-to-income ratio.
  • Down payment amounts are flexible if you include private mortgage insurance (PMI), which is a premium you’ll pay each month that protects your lender in case of default.

An FHA loan is a mortgage issued by a Federal Housing Authority-approved lender.  FHA loans are designed for buyers with low to moderate income levels and lower credit scores, a typical financial situation for a first time homebuyer. The minimum mortgage requirements for 2021 did tighten a bit for FHA applicants. Requirements include: 

  • A debt-to-income ratio of 31% or less (before future housing costs are factored in)
  • No delinquent federal debts. This includes student loans, taxes, and even child support.
  • Minimum down payment of 3.5% of the home’s value.
  • Credit score of 500 or above. HOWEVER, this depends on your down payment amount. For example, with 3.5% down, you could be approved with a FICO score of 580 or above. With 10% down, the minimum credit score is 500. 
  • Maximum loan amount varies by location

A USDA loan is backed by the US Department of Agriculture through its USDA Rural Development Guaranteed Housing Loan Program. This is a common loan type for first time homebuyers. As the name suggests, the loans are intended to keep rural areas populated, and requirements are more lenient with that goal in mind:

  • No minimum credit score: applicants with credit scores below 640 (or even no scores at all) go through a more stringent qualification process, but may still be approved. This depends on the USDA-backed lender.
  • Maximum yearly income increased in 2019 to $86,850 for a household of four or fewer members, meaning more households are eligible. This number can be higher if you are shopping in a high-cost area.
  • Debt-to-income ratio at or below 41%.

Home purchase must be in a rural area, but the definition of “rural” is pretty relaxed. Many suburbs qualify for USDA loans.

A VA loan supplies mortgage financing to eligible veterans, backed by the United States Department of Veteran Affairs. To qualify for a VA loan, here are the requirements: 

  • Applicants must meet service eligibility conditions and procure a VA loan certificate of eligibility 
  • No down payment is required, nor is private mortgage insurance.
  • While the VA loan program itself has no minimum FICO score, most lenders that fund the loans place the minimum score at 620.
  • No minimum income minimum, but applicants must demonstrate steady and reliable incomes
  • Debt-to-income ratio maximum of 41%.
  • No loan limit.

Although the minimum mortgage requirements for 2021 may seem daunting at first, the sheer number of options makes one thing clear: you’re so close to becoming a homeowner! A great way to get started is by reaching out to a professional at your trusted local bank for a one-on-one information session to see you through the next steps. 

Home-Improvement-Loans-Learn-More

References

 

Subscribe for all the latest news

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither Vast Bank, N.A. nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

By selecting any external link on www.vast.bank, you will leave the Vast Bank, N.A. website and jump to an unaffiliated third party website that may offer a different privacy policy and level of security. The third party is responsible for website content and system availability. Vast Bank, N.A. does not offer, endorse, recommend, or guarantee any product or service available on that entity's website.