Pre-qualify for a Texas FHA Loan
To qualify for a Texas FHA loan, a borrower must meet specific eligibility requirements. They must have at a minimum:
- Acceptable credit profile;
- Have at least 3.5% down payment;
- Ability to repay the mortgage as set forth by HUD guideline.
Borrowers applying for an FHA-insured loan must have at least a 580 middle FICO score. Compared to any other loan program, FHA is the easiest to qualify for, credit-wise. Those whose mid-FICO scores are below 580 but not lower than 500 may still be eligible for an FHA-insured loan as long as they have at least 10% to put down.
Benefits of FHA Loan
A down payment of 3.5% is required on all FHA transactions. The best part of all, the down payment can come from a family member as a gift towards the purchase of the house. The donor has to provide the source of the money being used as a “Gift Fund” to the borrower. The 3.5 percent down payment requirement is applicable to home buyers with a middle FICO score of 580 and above. As mentioned above, borrowers with a credit score below 580 and all the way down to 500, may still qualify for an FHA loan but they must come up with 10% down payment and other restrictions will apply.
FHA loan is the most lenient loan program available in the market. FHA only requires a 3.5% down payment to qualify for an FHA-insured loan. The minimum of 3.5% down payment requirement applies to borrowers with a mid-FICO score of 580 and above. As compared to conventional loans which require at least a 620 mid-FICO, getting an FHA-insured loan is a better option. Although a score of 580 is required, a prospective homebuyer must try to pull their credit scores up to at least a 640 to expect a better interest rate.
Contrary to popular belief, credit alone does not guarantee a mortgage loan. Credit, income and the borrower’s assets determine affordability and the total home loan to be extended.
The debt-to-income requirement of an FHA loan allows for the borrower to have a higher back-end ratio as compared to other home loan programs. The standard debt-to-income ratio requirement on FHA loans is set at 31/43%. The front-end ratio is the proposed housing expense divided by the gross monthly income. The back-end ratio is the gross monthly income versus the combination of the proposed housing expense, all revolving and installment accounts, student loans, personal loans, etc.
Some FHA lenders can go as high as 50% DTI, others at 55%; no other loan program in the market subscribes to this rule but FHA. We can go as high as 57% back-end ratio to qualified borrowers, with compensating factors and an AUS approval.
Who qualifies for an FHA loan?
A borrower who has gone through requirements listed above can qualify for an FHA loan. Credit, income, and asset determine eligibility for an FHA home loan. Applicants will go through the process of verification and must submit all necessary documents to the lender.
The Federal Housing Administration (FHA) insures the loan made by banks and other private institutions. The first thing that every prospective borrower needs to do is consult with an FHA approved lender. An FHA Home Loan Specialist will do an analysis of the borrower’s credibility and ability to pay back. This is a simple pre-qualification process. The borrower can take it one step further by opting to be pre-approved. This process will require documentation of income and assets required to move forward with the loan.
FHA Eligible Properties
An FHA loan can only be used for a primary residence; the property being must be owner-occupied and not an investment or rental property. Any 1 – 4 unit properties including condominiums, manufactured homes, modular homes, and planned urban developments are eligible for an FHA-insured loan. However, there are specific guidelines for properties with three or four units, as well as manufactured homes, Condominiums and PUDs.
We can get an automated underwriting approval from either Fannie Mae or Freddie Mac and go over the requirements and additional required documentation with the borrower. This will ensure that the borrower is approved per FHA guidelines.
For more information, call us at 346-297-0516.
An FHA Loan Specialist Available to Help You
Our FHA Loan Specialists are always available to help you and answer any questions. You may contact a dedicated FHA Loan Specialist through our website or by calling us directly.
We make the FHA Loan Process Quick & Easy
It’s not a secret that lenders often times will steer their clients away from an FHA loan due to their inexperience with the process. We find FHA Loans to be a great source of funding for our clients. We share our knowledge and experience with FHA loans, making it easier to get compared to conventional financing.
FHA Approved Lenders
The Federal Housing Administration requires lenders offering FHA loans to go through an extensive approval process. We are an FHA approved lender specializing in FHA Loans in Texas.