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Saturday, March 30, 2013

FHA Loan Guidelines - What You Need to Know Before You Apply

By Daniel Duffield

Loan. In order to qualify for the FHA loan requirements, you must meet these guidelines:

First Time Buying A Home

The FHA program is well suited to meet the financial needs of First time home buyers and encouraged to apply for FHA loans.

Social Security Requirement

Part of the FHA loan requirement : You be a legal resident of the United States, have a valid Social Security number, and be of the legal age to obtain a mortgage in your state.

Income

In order to prove to a lender that you have the fiscal responsibility to take a loan, you must have a consistent or rising income for at least two years.

Employment History

In addition to income, a requirement for an FHA loan: you must have a stable employment history and have worked at least two years with the same employer.

Credit Score

Your credit score must be 530 or above as part of the requirements for an FHA loan. Keep in mind, however, that you will have to pay a minimum down payment of 10% unless your credit is 580 or above, which qualifies you for a minimum down payment of only 3.5%.

Debt to Income

You must have a debt to income ratio of at most 31% to qualify for an FHA loan. The debt to income ratio is the total cost of the monthly mortgage payment against the borrower’s gross income.

For example, if you pay $1,000 total a month on your mortgage and earn a gross income of $4,000 a month, your debt to income ratio would be 25%.

FHA Loan Requirement : Total fixed payment vs. Effective Income – maximum ration = 43% (min. approximately 30%)

Your total fixed payment to effective income must not exceed 43% and must be a minimum of approximately 30%. Your total fixed payment is the sum of your monthly payments including mortgage payments as well as all recurring monthly fees (including car loans, student loans, credit cards, etc.).

Therefore, your total fixed payments cannot exceed 43% of your gross monthly income and must be greater than 30%. This ratio basically shows your lender that you can afford the loan.
Bankruptcy must be sufficiently old

If you have filed for Chapter 7 Bankruptcy, you must wait at least two years since borrower’s discharge date, not to be confused with the date which you filed for bankruptcy.

If you have filed for Chapter 13 Bankruptcy, you must have made and verified bankruptcy payments for at least a year.

Any bankruptcy on your credit report must be at least two years old. You’ll probably need to wait longer than that, though, if you want to qualify for one of the lowest mortgage rates you can.
Foreclosure Must Be Sufficiently Old

Although FHA mortgages are not typically given to borrowers who have had property foreclosed, exceptions can be made if the foreclosure is at least three years and credit has since improved and remained consistently good.

Closing Costs

When taking out an FHA loan, be prepared to pay the 2.25% closing costs. If you cannot afford them, however, these fees can be added to the loan.

Title Costs

To secure an FHA loan, you must be able to pay the title costs, which are fees relating to the change of ownership on a title.

My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.

The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.

It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.

Email me at scott@gerharterrealtors.com.

2 comments:

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