What are the FHA Home Loan Requirements

FHA home loan requirements are something every first time home buyer needs to understand to qualify for FHA loans. FHA home loans are the best for you. Find a cool list here.

With an FHA loan you only have to put down at least 3.5% of the property value--and, you may get that paid for you as a "gift". Read on and I will explain how this works.

Credit Requirements

FHA home loans first stipulate that you have at least two lines of credit. But, if you lack credit (this does not mean having bad credit), FHA will often allow alternative application forms to be filled out.

Chapter 13 Bankruptcy

If you are in Chapter 13 bankruptcy, you may still qualify for one of the FHA loans as long as you have been paying the judgment amount on time for at least one year. You will also need written approval from the court's trustee to get the loan.

Chapter 7 Bankruptcy

If you have gone through Chapter 7 bankruptcy, you have to have had it discharged for at least two years, have re-established credit, and now have a steady job.

Foreclosure In The Past

If you have previously been foreclosed upon, you likely do not meet FHA home loan requirements. But, if you can show past extenuating circumstances beyond your control, FHA may reconsider in your case.

Possible Late Payments

If you have some late payments on your credit report, this does not necessarily mean your credit is bad. Underwriters of FHA loans look for overall payment patterns and history, not isolated or occasional late payments. And, you do not need to have good credit to meet FHA loan requirements anyway.

Open Collections

If you have any open collections going on but it is a minor amount, FHA overlooks it. If you have any judgments against you, they must be paid off before you can apply. If you have federal judgments or tax liens against you, you cannot qualify for an FHA loan.

Down Payment Requirements of FHA Home Loans

One of the biggest advantage of FHA home loans is that they only require you to make at least a 3.5% down payment of the property value.

Also, you can get this down payment given to you as a "gift". This is NOT as another loan, from relatives or friend.

The seller of the property can help too. You will need to go through a non-profit gifting organization (there are plenty of them) to help you will this. So, it is feasible that you have no money at all for a down payment but can still meet FHA home loan requirements.

Other FHA Loans Requirements

FHA loans are subject to lending limits, but these are based on an array of housing types in addition to the state and county in which the property is located. If you are interested in an FHA loan, have the loan officer check to see if the property you want qualifies under the lending limits for type and location.

Now, to meet FHA home loan requirements once you pass the credit check, you will need to show that you are in a good enough financial position to responsibly pay the mortgage. Two factors are used for this. One is your mortgage payment expense to effective income ratio. The second is your total fixed payment to effective income ratio.

Those two ratios are expressed, respectfully, as your DTI (debt to income) ratio. For you to qualify for FHA, this ratio cannot be any higher, on either side, than 29/41. There are online tables that show you how to calculate each ratio.

Mortgage Insurance Requirements for FHA Loans

Most FHA borrowers are required to pay MI (mortgage insurance). This is almost entirely for borrowers (in any mortgage program) who do not put down at least 20% and protects the lender against default.

Mortgage insurance monthly premiums are charged at the rate of 0.5 percent per year of the total loan amount. FHA will additionally charge an upfront MI premium of 1.5 percent.

Depending on the term of the mortgage and the loan to value ratio (outstanding loan amount to property's open market value), at a certain point you can stop paying mortgage insurance on conventional loans.

Unfortunately, with FHA loans, you have to refinance out of the mortgage to avoid this. In other words, if you pay on an FHA loan for the entire 30 years you will pay mortgage insurance the whole time.

These are just a few of the FHA home loan requirements.

Leave FHA Home Loan Requirements and return to Best FHA Home Loans main page.

Return to First Time Home Buyer Solutions home page.

Would You Like Your Own Website?
Click Here for FREE Details.

© 2005-2011 All Rights Reserved
Powered By SBI!