FHA Home Loans
Looking for a low cost mortgage with a great rate? An FHA loan may be the right choice for you. But what is an FHA loan and do I qualify?
Who Qualifies for FHA Loans?
FHA loans were created to help first time home buyers purchase a home. The FHA-Secure program created in 2007 is in place to help homeowners who are at risk of being foreclosed on, with an adjustable rate mortgage, refinance their home into a new loan. It does not matter if you are refinancing your mortgage or buying a new home you need the following basic information to start the process.
- Bankruptcy: If you have filed a Chapter 7 Bankruptcy you will have to wait 24 months to qualify. In the case of a Chapter 13 you will need to have a perfect pay history for at least the past year.
- Credit Score: You will normally need a minimum credit score of 620 FHA financing or 640 for streamline FHA unless an exception is made. However, all collections (except medical collections) must be paid.
- Debt Ratios: Your debt ratio should be lower than 40% for housing and 45% total debt.
- Employment History: 2 years preferably in the same field along with W-2 or 1099 and tax returns. (If you were a student the past 2 years you can qualify if you are on the job a minimum of 30 days and have 2 pay stubs)
- Foreclosure: If you have foreclosed a property, finalized a short sale or executed a deed in lieu you will have to wait at least 36 months before you can qualify for a FHA loan.
- Proper ID: A valid social security number in addition to a driver’s license or photo ID is required.
What is an FHA loan?
An FHA loan is a mortgage that is provided with government assistance and insurance provided by the Federal Housing Administration. Only federally qualified lenders have the ability to provide consumers with an FHA loan.
The great depression of the 1930’s caused a dramatic increase in foreclosures and defaults forcing lenders to tighten their standards for lending to the public. The governments answer was to create the FHA loan program which enabled lenders to begin lending again. Even though the government did subsidize some programs, the goal was to provide a self-sustaining program funded entirely by insurance premiums paid by borrowers.
FHA loans have evolved over time. With the advent of private mortgage insurance (PMI), these types of mortgages became to predominant lending option for individuals who were not able to make the required down payments a conventional loan called for. Following the 2007 subprime mortgage crisis the government created a new program called FHA-Secure. FHA-Secure is a refinancing program developed to help homeowners who were unable to refinance their mortgage using traditional methods.
A low down payment is one of the biggest draws an FHA loan can offer a borrower. Most of the time all you need is a 3.5% down payment. However, you may need a minimum down payment of 10% if you qualify for a loan with a credit score of 580 or lower.
The question is often asked “What are the limits to the size of mortgage I can get using an FHA loan?” Each county in the country has its own lending limit. You can easily find out what the maximum loan amount is in your county if you visit HUD’s FHA mortgage limit page.
It has never been easier to find an experienced FHA lender. We will match you with an FHA approved mortgage lenders when you complete our free no-obligation form. Looking for an FHA Secure loan to refinance out of your adjustable rate mortgage? Maybe you want to buy a new home and want to see how much of a mortgage you qualify for? No matter your need get matched with some of the top lenders in the country and find a great rate on your next loan now!