Top 5 Home Loan Options for New Construction in Texas

Buying a home calls for good financial investment. The decision to choose new build home loan that suit your home financing needs well is not a cup of tea. This difficulty even builds up more for first-time home buyers. We at Dream Home Mortgage understand this need well and come up with a detailed guide. This guide will take you on a thorough trip of the top 5 home loan options for educating first-time buyers and even the old ones completely to make a wise decision.

Top 5 Home Loan Options You Can’t Miss!

Here is the list of top 5 home loan options that may be your perfect pick for home loans. Let’s get deep into each one of them to know what these loans are, their requirements, and interest rates.

1. FHA Loan

FHA Loan is insured by the Federal Housing Administration (FHA). It is available for fixed 15 years and 30 years; also, an adjustable rate can be provided. This loan type is mostly available by first-time home buyers as it make the best choice with minimal upfront cost and easy qualifications. FHA is eligible for low to moderate-income borrowers, borrowers with limited savings, and first-time home buyers. This loan is affordable and comes with lower down payments. People who have lower credit scores can avail of it without any hurdle. Moreover, this FHA loan streamlines refinancing with appraisal requirements and less documentation.

Requirements:

• There must be a Low down payment of 3.5% of the home price.
• There is a need for a credit score of 580. However, 500 to 579 may qualify with a down payment of 10% of the home price.
• There must be 43% of DTI. However, some lenders also accept 50% as well.

2. Jumbo Loan

Jumbo loan is a house mortgage option to buy property having more conforming loan limits that are set by Federal House Financing Agency (FHFA). The conforming loan limit fluctuates as per the government. However, the current conforming loan limit is $726,000. This loan is not for government-sponsored properties. Jumbo loans are the top pick of people who like to buy property in posh areas or luxury homes.

Jumbo loans usually have a slightly higher interest rate due to the increased risk of lenders. However, you can always get better competitive prices based on the borrower’s financial profile. Let’s dig into the requirements for applying for this loan.

Requirements:

• To get a jumbo loan, borrowers need to have a credit score of 700.
• Borrowers need to pay a large down payment of 10 to 20% of the property value.
• Borrowers have a low Debt to Income ratio of less than 43%.
• There must be strong proof of income and assets through documentation.

3. Conventional Loan

Private lenders offer conventional loans, but government agencies like FHA, VA, or USDA Rural Housing Service do not guarantee this type of loan. For this loan type, you need to stay within the conforming loan limit of $726,000. Conventional loans offer competitive fixed or adjustable loan rates. The loan term for conventional loans include 15-30 year fixed mortgage rate. This loan is ideal for buying a primary residence, second home and investment properties.

Requirements:

• Down payment is as low as 3% for first-time buyers or for those meeting specific requirement.
• A credit score of 620 is required. However, borrowers with credit scores of more than 700 get better interest rates and terms.
• Debt to Income ration of below 50% is required. 
• Private Mortgage Insurance (PMI) is required if you pay a down payment of less than 20%.

4. High Debt To Income Ratio Loan

This loan is for borrowers whose DTI exceeds the limit set by lenders. The purpose of this home loan is to help those people whose income is relatively lower than their level of debt.  Types of DTI Loans include FHA Loans, VA Loans, and USDA Loans. There are a few requirements that lenders must fulfill in order to avail of High Debt to Income Ratio Loan.

Requirements:

• To avail of this loan, a high credit score, significant cash reserve, large down payment, and stable employment history is a must.
• You must be able to pay a high interest rate.
• Private Mortgage Insurance (PMI) requires if the loan to value ratio LTV exceeds 80%.

The tip is to work with experienced lenders, as they can potentially help you identify loan programs that fit your financial situation better. If you are wondering who to trust, look no further than Dream Home Mortgage, as we have decades of experience in this field and can help you better.

So here is the complete guide of the top 5 home loan options for construction in Texas. Now, you are quite aware of what loan type is suitable for which borrowers and what the requirements are for each. The decision-making is quite easy for you at this moment. If you are planning to avail yourself of a home loan but are not sure who to trust, Well, look no further than Dream Home Mortgage as we are the most experienced out there. Book a free consultation Now!