Qualifying For FHA Loans Chicago With No Overlays

This BLOG On FHA Loans Chicago Was Written By Gustan Cho NMLS 873293

FHA Loans Chicago

Qualifying For FHA Loans Chicago has its advantages due to the higher loan limits HUD Allows for the six counties surrounding the Chicagoland Area. The following six Chicago, Illinois counties are considered high cost areas and the FHA Loan Limits are substantially higher than the rest of the states. Here are the six high cost counties with higher limits on FHA Loans Chicago:

  • Cook County
  • Lake County
  • Will County
  • McHenry County
  • DuPage County
  • Kane County

FHA Loans Chicago Requirements

Chicago and its surrounding suburbs have higher home prices than the rest of the state and due to higher home values, HUD set higher FHA Loan Limits for Chicago and its six surrounding counties for owner occupant one to four units.

Here are the requirements to qualify for FHA Loans Chicago:

  • Needs to be owner occupant primary homes
  • FHA allows one to four unit residential properties
  • It can be condominiums, however, the condo complex needs to be FHA Approved
  • Minimum credit scores required to qualify for a 3.5% down payment FHA Loan Chicago is 580 FICO
  • Borrowers with under 580 FICO can qualify for FHA Loans, however, anyone with credit scores between 500 to 570 FICO, 10% down payment is required versus 3.5%
  • Debt to income ratio on FHA Loans Chicago depends on the borrower’s credit scores
  • FHA allows 46.9% front end DTI and 56.9% DTI for borrowers who have at least 620 FICO credit scores.
  • Borrowers with under 620 FICO credit scores have caps on DTI. Maximum debt to income ratio is 43% DTI to get an approve/eligible per Automated Underwriting System.

Role Of FHA

The United States Department of Housing and Urban Development is the parent of the Federal Housing Administration. FHA is not a mortgage lender but a government agency under HUD whose role and mission is to promote home ownership to hard working Americans by insuring FHA Loans originated and funded by private lenders. Lenders need to follow FHA Guidelines in order for the FHA Loans they originated and funded default and go into foreclosure. Lenders are eager and willing to lend FHA insured loans with low mortgage interest rates and low down payment due to the low risk of having HUD insure the loans they originate. FHA has one of the most lenient credit and income guidelines out of any other loan programs in the U.S. Borrowers with prior credit issues and higher debt to income ratios can now qualify for FHA Loans Chicago without having to meet the standard mortgage requirements such as having 20% down payment and great credit scores.

FHA Loans Versus Other Loan Programs

Most home buyers think that FHA Loans are for folks with bad credit, low income, and low credit scores. This is not the case but FHA is a great loan program for home buyers who have little money for their down payment and do not have a strong credit profile. After the 2008 Mortgage and Real Estate Meltdown in Chicago and the rest of the United States, FHA Loan Programs has become more popular than ever before in history because most mortgage lenders have set higher lending standards like larger down payment requirements and higher credit requirements.

Here are the benefits of FHA Loans and are perfect for the following folks:

  • First Time Home Buyers
  • Buyers who need to purchase a home with low down payment
  • FHA requires 3.5% down payment on a home purchase
  • Borrowers with low credit scores. FHA only requires borrowers to have 580 FICO Credit Scores
  • Borrowers with lower income. FHA allows up to 46.9% DTI front end DTI and 56.9% DTI to get an approve/eligible for Automated Underwriting System approval
  • Outstanding collections and charge off accounts do not have to be paid off to qualify for FHA Loans Chicago
  • FHA permits non-occupant co-borrowers to be added on for borrowers who does not meet the income requirements and/or does not have documented income
  • Qualifying for FHA with gaps of employment in past two years are allowed: Borrowers who have been unemployed six months or less, they just need to be employed for 30 days at their new full time jobs to close on their FHA Loans. Borrowers who have been unemployed six or more months need to be on their new jobs for six months to qualify for FHA Loans
  • FHA has W-2 income only mortgages for borrowers who have substantial unreimbursed expenses

Chicago And FHA Loans

FHA Loans are extremely popular in the Chicagoland Area and its six surround counties. Over 35% of all loans in Chicago and its surrounding suburbs are FHA Loans. FHA Loans Chicago is different than other areas because Chicago FHA Loan Limits are substantially higher than the rest of the state of Illinois as well as the nation. There are many different types of loan programs but FHA Loans are by far more popular than any other loan programs.

Benefits Of FHA Loans Chicago

As mentioned earlier, HUD is the parent of FHA and it is not the function of FHA to lend money. This federal agency role and function is to guarantee home loans that meet FHA Guidelines that has been approved, originated, and funded by private lenders, banks, and financial institutions that are HUD Approved Lenders. The guarantee that FHA offers is in the event if the FHA Loan that was funded ever goes into default and foreclosure, FHA then will guarantee the lender against the loss. In order for FHA to guarantee the loan, all aspects of the loan needs to meet FHA Lending Requirements. Due to the backing of the credit and faith of the federal government standing by FHA Loans, financial institutions have little risk when originating and funding FHA Loans and can offer the following benefits for Chicago FHA Borrowers as well as other borrowers throughout the country:

  • Competitive low mortgage interest rates 
  • 3.5% down payment
  • Lenient credit requirements
  • 580 minimum credit scores
  • Outstanding collections and charge offs do not have to be paid to qualify for FHA Loans
  • Maximum debt to income ratio caps are at 56.9% DTI for borrowers who have at least a 620 FICO Credit Score
  • Allows 100% of down payment to be gifted
  • Allows for non-occupant co-borrowers

Borrower Eligibility Requirements

FHA Loans are offered to borrowers with the following qualification requirements:

  • Legal lawful resident of the United States. Borrowers do not have to be a United States Citizen, however, they do need to be in this country legally.
  • Borrowers need to have a valid social security number and card and meet the legal age in the state of Illinois to sign a real estate and mortgage documents.
  • Have two year employment history, not necessarily continuous.
  • Have two year of residential history in the United States.
  • Only owner occupant one to four unit primary residential properties are eligible. FHA does not insure second homes and investment properties.
  • Condominiums are allowed but the Condominium Complex needs to be FHA Approved.

HUD Credit And Down Payment Requirements

  • 3.5% down payment for borrowers with at least 580 credit scores.
  • Borrowers under 580 FICO can qualify for FHA Loans Chicago with 10% down payment.
  • Minimum credit scores required to qualify for FHA Loans is 500 FICO.
  • Debt to Income Ratio caps at 56.9% back end and 46.9% front end to get approve/eligible for Automated Underwriting System if credit scores are 620 FICO minimum. Under 620 FICO, max DTI cap is 43% DTI.
  • Borrowers can qualify after foreclosure and bankruptcy: 2 year waiting period after Chapter 7 Bankruptcy discharged date.
  • Borrowers can qualify for FHA mortgage one year into a Chapter 13 Bankruptcy repayment plan with the approval of their Chapter 13 Trustee.
  • There is no waiting period after Chapter 13 Bankruptcy discharged date to qualify.

Loan Limits On FHA Loans Chicago

There are Loan Limit Restrictions on FHA Loans Chicago. The maximum FHA Loans Chicago Limits depends by the county the property is located within the state of Illinois. The loan limits for the six counties surrounding Chicago has the same uniform FHA Loan Limits. Here are the six counties of Illinois that has higher FHA Loan Limits:

  • Cook
  • Lake
  • Will
  • DuPage
  • McHenry
  • Kane

Here Are The FHA Loan Limits For The Six Counties Of Illinois Neighboring Chicago:

  • Single Family Unit    $365,700
  • Two Family Unit        $468,150
  • Three Family Unit     $565,900
  • Four Family Unit       $703,250

If a home buyer is looking to purchase a home in Illinois outside the six counties surrounding Chicago, the FHA Loans Limits will get greatly reduced as follows:

  • Single Family Unit   $275,665
  • Two Family Unit      $352,950
  • Three Family Unit   $426,625
  • Four Family Unit    $530,150

The above FHA Loan Limits will be for most areas in the state of Illinois. The reason for the drastic reduction of FHA Loan Limits outside the six counties surrounding Chicago is due to the fact that housing values outside the six counties surrounding Chicago is substantially much less and FHA loan limits is based on the median cost of home prices. A $365,700 home in downstate Illinois will go much further than a Chicago waterfront condominium.

Two To Four Family Units FHA Loans Chicago

Those who are familiar with Chicago properties know that many properties in Chicago and its surrounding suburbs are two to four unit multi-family units. Many neighborhoods of Chicago like Albany Park, Old Irving, Bucktown, Lakeview, Humbolt Park, Austin, Wicker Park, Lakeview, DePaul, Ukrainian Village, West Town, Jefferson Park, Logan Square, West Bucktown, Little Italy, Greektown, Rogers Park, Lincoln Square, Mount Greenwood, Beverly, Morgan Park, West Humbolt Park, and surrounding suburbs are lined up with two flats, duplexes, three units, and four unit multi-family dwelling. The great news is that home buyers of two to four unit properties can purchase multi-unit properties with FHA Loans with 3.5% down payment and 580 FICO credit scores. Borrowers can also use potential rental income of 85% of potential market rents on their rental units as qualified income. First time home buyers who are planning on becoming real estate investors can purchase their first home with a multi-family residential property using a FHA Loan.

The Gustan Cho Team at Nationwide Mortgage & Realty LLC Can Help Borrowers With FHA Loans Chicago With No Overlays

FHA Loans is hands down the best mortgage loan program not just for Chicago home purchase but anywhere in the country. A FHA Loan is affordable and most anyone with full time job and steady income will be able to qualify for FHA Loans Chicago with The Gustan Cho Team at Nationwide Mortgage & Realty LLC.

Let the FHA mortgage specialists at The Gustan Cho Team and Gustan Cho Associates help borrowers navigate through the mortgage loan application process to insure that borrowers get the right home loan at the right price. Call Gustan Cho Associates at 262-878-1965 or text Gustan on his cell at 262-716-8151 today! The Gustan Cho Team at Nationwide Mortgage & Realty LLC NMLS 276777 has no lender overlays on government and conventional loans. We are available 7 days a week, evenings, weekends, and holidays.

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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