Home Buyers: Do You Qualify For FHA Loan?

Do You Qualify For FHA Loan Article Written By Jesse Smith

Do You Qualify For FHA Loan:

Home Buyers, if you are presently renting a home or apartment and thought applying and qualifying for a home mortgage loan and see if you meet the qualification requirements of a FHA insured mortgage loan, read further. The process to qualifying for an FHA insured mortgage loan is much more lax due to its lenient mortgage lending guidelines than qualifying for a conventional home loan, due to the fact that conventional loans requires a high credit score ( 620 FICO versus FHA’s 580 FICO )  and has much more stringent credit requirements with regards to outstanding collection accounts and debt to income ratio requirements. Mortgage Loan Borrowers who can not get qualified for conventional mortgage loans due to credit challenges, often apply for an FHA 203(b) Loan. Mandatory waiting periods after bankruptcy and foreclosure is much less with FHA Loans than it is for Conventional Financing.

Do You Qualify For FHA Loan? Down Payment Requirements

While you are renting an apartment or home, home buyers should plan and start saving for a down payment for your home purchase. All home purchase loans, with the exception of VA Loans and USDA Loans, require down payments. Home buyers should also consider how much home you are looking to purchase as well as how much home you can afford. Under FHA 203b mortgage lending guidelines, home buyers can qualify for a home purchase loan with 3.5% percent of the home’s purchase price as down payment with a credit score of 580 FICO credit scores or higher. If your credit score falls between 500 FICO credit scores and 579 FICO credit scores, home buyers will need a minimum of a 10% percent down payment on their home purchase. Home buyers, especially first time home buyers,  might want to consider repairing and re-establishing your credit and see if you can maximize your credit scores to be able to qualify for the 3.5% down payment home purchase FHA Loan by meeting the required 3.5% down payment. Secured credit cards is the best way of re-establishing one’s credit. Secured credit cards are like traditional unsecured credit cards but the consumer needs to put an upfront deposit with the secured credit card company and the secured credit card company will issue a credit limit equivalent to the amount of the consumer’s deposit.

Do You Qualify For FHA Loan? Credit Scores

Home buyers should plan ahead and review your credit score before they apply for a FHA mortgage loan. Experian, Equifax and TransUnion , which are the three world’s largest credit reporting agencies, will provide a free annual copy of your credit report as mandated by law. However, these three credit bureaus will not give you your credit scores and will only provide your credit report. To get your credit scores,  you will have to pay a fee. There are a few credit websites that sells credit scores for as little as $1.00. Home buyers with lower credit scores must meet minimum credit score and debt to income ratio requirements to qualify for FHA Loans. Also, when reviewing your credit scores, make sure there are no errors on your credit report.

Do You Qualify For FHA Loan? Choosing The Right FHA Mortgage Lender

Choose an FHA-approved mortgage lender. Not all mortgage lenders offer FHA 203b Mortgage Loans and every FHA mortgage lenders have different credit and debt to income ratio requirements and many of them have mortgage lender overlays   .  Mortgage lender overlays are additional mortgage lending guidelines on top of the minimum mortgage lending guidelines set by FHA. For example, minimum credit scores to qualify for FHA Loans is 580 FICO. FHA will insure FHA Loans where the mortgage loan borrower has 580 FICO Credit Scores, however, most banks and mortgage companies have minimum credit score requirements of 640 FICO. This is called a mortgage lender overlay on credit scores. Same with debt to income ratios .  FHA allows a maximum debt to income ratios of up to 56.9% back end. However, many mortgage lenders have lender overlays on debt to income ratios caps at 45% DTI. The Department of Housing and Urban Development, HUD, maintains an online lender website look-up tool for all FHA approved mortgage lenders nationally. Although many FHA mortgage lenders offer lenient credit requirements, some FHA mortgage lenders have more strict eligibility requirements, FHA mortgage lender overlays, than the standards set by the FHA due to their own mortgage lender overlays. If you are looking for a FHA mortgage lender with no mortgage lender overlays, contact us at Gustan Cho Associates 262-716-8151. We are a FHA mortgage lender with no investor overlays and only go by federal minimum FHA mortgage lending guidelines

When shopping for a FHA approved mortgage lender may sure you ask the mortgage loan originator about the FHA loan limits in your area because they vary state to state and county to county. The standard FHA Loan Limits in most parts of the country is $271,500 unless the property is located in a high cost area. You can also find FHA loan limits on areas you are planning in shopping for a home by using HUD’s online look-up tool.  California has one of the highest home prices in the nation. For example, San Francisco has a higher loan limit than most parts of the country due to high median home prices. Maximum FHA loan amount up to $729,000 in San Francisco and its surrounding areas due to the high cost of housing. Other areas in California have FHA Loan limits up to $625,000 and many other parts of the country are classified as high cost areas where the FHA Loan Limits are much higher than the standard FHA Loan Limit of $271,500.

Do You Qualify For FHA Loan? Questions To Ask FHA Lenders

The two types of costs required when buying a home are the down payment for the home purchase and closing costs. Closing costs are loan origination fees, credit reporting fees, appraisal fees, mortgage insurance costs, pre-paids ( escrows ), homeowners insurance, title charges, recording fees, and any third party charges. Keep in mind that the Federal Housing Administration will require mortgage loan borrowers to buy mortgage insurance to protect the interests of the mortgage lender in the event if the FHA mortgage loan borrower defaults on his or her FHA Loan.  The FHA mortgage loan borrower pays for the FHA mortgage insurance premium for the benefit of the mortgage lender. Also added is a one-time upfront mortgage insurance premium which is a one time fee of 1.75% of the mortgage loan amount which is added on the mortgage loan at closing. You must also pay FHA annual mortgage insurance premium for the life of the FHA Loan in monthly installments, which the mortgage lender charges in addition to your mortgage payments.

When submitting your FHA mortgage loan application, make sure you provide your employer information and any addresses where you have lived during the previous two years with no gaps. Mortgage loan borrowers will also have to provide the mortgage loan processor with a copy of their social security card, two years W-2 forms and copies of your complete federal income tax returns for the last two years.

All mortgage lenders will require a home appraisal. Mortgage loan officer will work with home buyers to pay for a home appraisal using an appraisal management company, AMC.  FHA requires that the subject property meet certain minimum standards for  FHA mortgage loan approval. The FHA home appraiser will be checking  for health and safety hazards in the property and your mortgage lender may require repair of the defects and items that do not meet FHA housing inspection standards before it can approve your FHA loan. The property must appraise at the purchase price or higher.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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