Step 1
PREPARING TO BE A HOMEOWNER
For most of us, purchasing a home is the biggest investment that we ever make. It can be an exciting and fun process. Here are some basic requirements to be eligible for a mortgage.
Buying a home is one of the biggest financial investments most people will ever make—and it can be an exciting and rewarding experience when you’re prepared. Before applying for an Austin home loan or any Texas mortgage, it’s important to understand the basic requirements lenders look for when determining eligibility.
Employment & Income Requirements
Most mortgage programs require two years of established work history. If you’re entering a field related to your college degree or trade school training, that time in school can count toward your employment history.
If you’re self‑employed, lenders typically require your most recent two years of tax returns to calculate qualifying income.
Down Payment Requirements
Down payment minimums vary depending on the loan program:
• VA and USDA loans: Typically no down payment required
• FHA loans: Minimum 3.5% down payment
• Conventional loans: As low as 3% down for first‑time homebuyers
Regardless of the program, you’ll need to document the source of your down‑payment funds to maintain loan approval.
Credit Score Requirements
Credit score guidelines also differ by loan type:
• Conventional loans: Require a 620+ middle credit score (no exceptions)
• USDA loans: Typically require a 640+ middle score, with some flexibility depending on overall file strength
• FHA & VA loans: Require 580+ middle scores
• Note: FHA does allow scores below 580, but these programs require a minimum 10% down payment instead of 3.5%.
Understanding Affordability
Once we prequalify or approve you for a home loan, it’s important to remember that what you qualify for on paper may not match what feels comfortable for your budget. As your mortgage professionals, we will never pressure you into a payment that doesn’t align with your financial comfort zone.
Always take a close look at your personal budget before making a final decision.
Common Questions From First‑Time Homebuyers
Why do credit score requirements vary by lender for FHA and VA loans?
FHA and VA monitor lenders based on their default rates. If a lender’s default rate rises above the national average, they may be required to tighten their guidelines—often by increasing minimum credit score requirements. These additional requirements are set by the lender, not by FHA or VA.
How long do I plan on living in the home?
If you expect to move within 12–24 months, purchasing may not be the best financial decision. Most buyers need to stay in a home for around three years to recoup selling costs.
How much money will I have left after closing?
It’s important to keep some savings in reserve. Even with a home warranty, unexpected expenses—medical bills, car repairs, or emergencies—can happen. We encourage you not to use every dollar you have for your home purchase.
Can the seller help with closing costs?
Yes. Most loan programs allow the seller to contribute toward closing costs, reducing your out‑of‑pocket expenses. Many of our clients bring only the down payment to closing and structure the contract so the seller covers the remaining costs.
This doesn’t mean you aren’t paying them—it simply gives you the option to roll those costs into the loan instead of paying them upfront.
This is an important conversation to have with both your loan officer and your real estate agent before writing an offer.
CHECK OUT THE
BENEFITS OF AN FHA LOAN
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