Top 3 Conventional Loans for High DTI Ratio & 8 Steps to Approval.

Are you worried about a high Debt-to-Income ratio when buying a new house? Buying your very first house can be a challenge on its own, which becomes harder to achieve if you have a high DTI ratio. This is because homeownership is a perilous undertaking that is filled with ups and downs. You also have to ensure that you have adequate financing and all the necessary documents, as it is a long-term investment. No need to worry. Nowadays, a lot of private lenders such as banks, union credits, and mortgage companies offer conventional loans for high DTI ratio buyers.

If you are unsure about which type of conventional loan is the best option for you and how you can procure one, then you have come to the right place. We will discuss three types of conventional loan options as well as an 8-step guide that will give you an overview of how to secure a loan.

Let’s take a look at the 3 types of conventional loans for high DIT ratio buyers first.

Top 3 Types of Conventional Loans for High DTI Ratio:

Many new home buyers tend to gravitate towards conventional loans because they offer flexibility and better rates when compared to government loans. This is because conventional loans are not insured by the government. Therefore, the procurement of such loans is easier as well because they do not have strict requirements as compared to government backed loans.

1. Fixed Rate Loan:

This conventional loan option is quite famous among first time home buyers as it offers fixed interest rates. Therefore, it makes monthly repayments easy for first time home buyers.

Perks of Fixed-Rate Loan: 

• Safe from Interest Rate Spikes: Buyers who are able to secure a conventional loan are protected from surge in interest rates in the future.
• Better Budgeting: One of the best perks is that you won’t ever spend over budget when it comes to monthly mortgage repayments as they remain same.
• Less Pressure on Long Term Finances: Fixed payment perk of conventional loans makes it easier in the long term.

2. Adjustable Loan Rates:

If you are a little tight on finances in the initial months of loan procurement then this is a good option for you. These loans tend to start with a lower rate as compared to other conventional loan options such as fixed-rate loan. The interest rate of this loan depends on the conditions of the market.

• Low Interest Rates: This makes repayment in the initial months easier, thanks to the low rates.
• Potential for Lesser Interest Rates: When the interest rates throughout the market decrease, your repayment will decrease accordingly.
• Gives Flexibility: This option is good for those buyers who are looking to sell or refinance their house before the adjustment period starts.

3. Combination Loans:

Just as the name suggests, this type of loan option is a mix between fixed-rate loans and adjustable-rate loans. One of the best examples of this type of conventional loan is 5/1 ARM. This loan offers fixed interest rates for about 5 years, and then after that, it adjusts once per year.

• Stability: During the first few years, thanks to the fixed interest rates, you don’t have to worry about fluctuations.
• Initial Low Rates: These loans offer lower interest rates initially as compared to traditional loans.

8-Step Guide to Securing a Loan for Your Dream House:

Here is a guide that will provide you with insights into how to procure a loan with ease.

1. Get Your Finances in Order: The first step before you even decide on different loan options or even look at a property is to make sure that you have sufficient funds.
2. Improve your DTI Ratio: If you have lower DTI, it not only expands your options but also assures the lenders that you are capable of making repayments. So, you need to improve your credit score, pay any pending loans, and make sure you don’t apply for any unnecessary loans.
3. Start Saving for a Down Payment: It is always a good idea to save about 20% of the down payment as it helps avoid high interest rates, as well as private mortgage insurance (PMI).
4. Meet Different Lenders: Now that you have overcome the hurdle of financing and high DTI, you should meet different mortgage lenders. You can compare their offers by comparing the interest rates and the applied terms. It is a good idea to check both traditional and online lenders.
5. Pre-Approval on the Loan: You should submit the required documents as soon as possible to get pre-approved for the conventional loan as it will help convey to the seller that you are a serious buyer.
6. Choose the Loan That Suits Your Needs: Make sure that you give proper thought to which one of the conventional loans for high DTI ratio is perfect for you before securing it.
7. Submitting the Application: By submitting the application for loan procurement you are one step closer to your dream house. Make sure all the documents are in order such as the pay stubs, bank statements and tax returns.
8. Close the Deal: Once you have been approved for your loan, make sure you read all the terms and conditions. Now, finalize the loan by paying the closing costs.

Get the Best Conventional Loans at Dream Home Mortgage!

If you are looking for the most inclusive mortgage lender then your best bet is Dream Home Mortgage. They provide a wide range of conventional loans for high DTI ratio buyers all under the same banner. You will soon become the owners of your dream home under the stewardship of the senior most loan consultant at Dream Home Mortgage, Mr. Hussein Panjwani himself. So, what are you waiting for? Book your free consultation today!