FHA home loan requirements are something every first time home buyer needs to understand and try to qualify for. FHA home loans are the best for you. Find those requirements below.
If you are a first time home buyer and you can meet the FHA home loan requirements, you could help yourself dramatically. FHA loans are often perfect for new home buyers because they tend to lack funds for the down payment requirement.
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.
Want to see if you can qualify for a mortgage? Click here to find out the requirements.
Now, foremost among FHA home loan requirements, is your credit.
Your credit is seen by lenders as a past indicator of how well you handle money and responsibility.
FHA home loans first stipulate that you have at least two lines of credit.
But, if you lack in credit (this does not mean having bad credit), FHA will often allow alternative credit forms to be filled out.
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.
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.
So this type of bankruptcy doesn't have to stop you either!
This could prove to be a problem. 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.
So investigate your possible options.
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 these loan requirements anyway.
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.
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.
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.
Most FHA borrowers are required to pay 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 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.
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Would you like to know what kind of loan programs are available? Visit our First Time Home Buyer Programs page for help that can enable you to make an informed decision.
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