An FHA loan is usually one of the top financing options for people looking to buy a new home. This government-backed mortgage program is particularly appealing to first-time homebuyers and people with young credit history because of its more lenient credit requirements.
This article will tackle to buy a new home. This government-backed mortgage program is particularly appealing to first-time homebuyers and people with young credit history because of its more lenient credit requirements. This article will tackle FHA loan requirements, guidelines, and qualifications.
Who Can Get an FHA Loan?
Perhaps, the most frequently asked question about FHA loans is: Who can qualify?
While the FHA loan is well-known as a first-time homebuyer loan, it’s not exclusive to people buying a home for the first time. Just about anybody can obtain an FHA mortgage as long as they meet the qualification standards set by the FHA, which are as follows:
- Borrower must be a resident of the United States, with a valid Social Security number.
- Borrowers must be old enough to sign a mortgage in their state.
- Borrower must have a steady source of income and have been employed with a 2-year verifiable work history.
- Borrowers must have a manageable level of debt and meet debt-to-income ratio requirements.
What are the FHA Loan Requirements?
FHA loans may have looser qualifications than conventional loans, but there are also minimum requirements for borrowers. Moreover, lenders may add their stipulations and requirements.
Here are the minimum requirements for FHA loans:
FHA requires a FICO score of 580 to qualify for a 3.5% down payment. People with higher credit scores have a better chance of getting approved for an FHA loan, but you can qualify for an FHA loan with a credit score of 500. Lenders may also allow the use of non-traditional credit as proof of creditworthiness.
A credit score of 580 or higher entitles you to the 3.5% down payment rate. Those with credit scores lower than 580 will have to pay at least 10% of the home’s purchase price upfront; certain restrictions will apply.
The FHA requires a front-end debt-to-income ratio of 36%. This means that the proposed total monthly mortgage payments shall not exceed 36% of the borrower’s gross income. The back-end ratio, which is the proposed housing expense plus all your debts and taxes, must not exceed 45% of your gross income. However, lenders may adjust the DTI requirements to fit with compensating factors.
History of Bankruptcy and Foreclosure
Need a mortgage after a bankruptcy? You should be out of bankruptcy for at least three years or out of foreclosure for two years to qualify for an FHA loan. Also, you must have been able to re-establish good credit standing.
You can buy a single-family home, 2 to 4-unit multifamily home, condo, townhouse, manufactured home, or even a fixer-upper with an FHA loan. However, homes purchased with an FHA mortgage must be used as primary residences, not for investment or business purposes.
How To Apply For An FHA Loan?
The first step to applying for an FHA loan is getting in touch with an FHA-approved lender. There should be plenty of FHA lenders near you, so finding one won’t be a problem. You can also prequalify online. The FHA Loan Specialists at TexasFHA.org are ready to assist you with your mortgage needs.