FHA loans are mortgages insured by the Federal Housing Administration, whose main aim is to enable borrowers get a house with very little out of pocket expense, insuring the loan against future default via their mortgage insurance. This ensures that the lender doesn’t go into a loss in case the borrower defaults on the loan. If you are buying a home for the first time, then it is the best option because the requirements are less strict. The down payment is 3.5%, which is lower than the common home loans that requires down payments of between 5-10%. What exactly are lenders looking for to enable you to borrow the loans? If you want to know if you meet the qualifications then you have to apply for it via an approved lender. Here are some of the requirements;
A stable income-This is one of the factors that many lenders look at before they allow anyone to get a loan. They will need to confirm that your income is stable by going through your income-related documents like tax records. The salary you get monthly has to cater for all the payments.
Having a manageable debt is also another of the qualifications. This means that the borrowers’ debt-to-income ratio should not exceed 50%. In simple terms, the total debts accumulated monthly, including the proposed housing payments, should not take away more that 50% of your gross income.
Credit-You need to have a good or decent credit. The Department of Housing and Development states that you can qualify for the loan with a credit score that is as low as 580. This does not mean that your credit score has to be low. Most of the lenders will be looking for borrowers with credit scores which are over 620.
This is one of the qualifications that must be met. The down payment has to be no less than 3.5%. If you cannot meet this requirement, then you can be sure that you won’t qualify for the loan. You can have a family member give you the funds to close in form of a gift, thus “gift funds”.
The only way for home buyers to know if they qualify is to apply. If you don’t qualify you will be notified on the areas you need to look into in order to qualify. It is important to note that the qualification criteria changes with different lenders. Away with the FHA loan qualifications. There are many advantages of the FHA loans. The main advantage of these loans is that it is easier to qualify for them compared to other home purchase loans. They are more suitable for young people early in their careers considering they are less costly.
The fact that they are less costly does not mean that the loans are only suitable for first time home owners. You might get into debt as a result of the sub-prime mortgages (with interest rates) and FHA loans will help you get out of them. Home mortgage refinancing is another advantage, especially if you are faced with default on other loans. This is helpful especially when you are striving to maintain good credit ratings. There are many ways that one can get into the home loan for refinancing and this comes with several benefits which include:
Low interest rates
FHA insured loans carry a lower rate as compared to conventional loans. If you qualify, the rate is fixed and the mortgage payments are stable throughout the term of the loan. The minimum credit score and other guidelines must be met in order to qualify. Borrowers with no trade lines can use an alternate trade line in lieu of the traditional credit profile. It’s is not like the guidelines for conventional loans where you need to have a 2-year old clean credit history.
No Need For Huge Down Payment
It is not necessary for a home buyer to have a lot of money to buy a house. This means that the average can person get a home loan. The loan is, therefore, accessible by everyone who lives here in the United States as long as it will be used as their primary residence. The lenders who are available to fund the loans also make the loans easily accessible.
This includes credit unions and loan institutions. Various banks offering these loans have different requirements so when one bank doesn’t approve your application you can look for another one that will do so. The most common type of mortgage you can get is a 30-year fixed rate, although FHA offers other different types of mortgage terms. The loan also enables the home buyers to purchase any home of their desire as long as it meets the requirement and loan limit.
Individuals looking for a 100% financing program can avail of the USDA Guaranteed Home Loan Program for properties located in a designated rural area or the VA Home Loan Program for Veterans and our servicemen and women.