The Federal Housing Administration makes it easy to buy a house by putting in as little as 3.5% of a down payment. On top of a required credit score much lower than that of conventional mortgages, FHA becomes a clear winner for homebuyers looking at being able to bag
To be clear, FHA mortgages aren’t exclusive to first-timers, nor are they only for low-income applicants. They are for everyone and anyone who can make the cut.
How to qualify for an FHA loan
Steady income that is verifiable with tax returns and pay-stubs is the primary and most essential requirement to meet first when applying for an FHA loan. Generally, lending companies will need to see that you’ve been employed or have been receiving a steady paycheck for a year or two before applying. Otherwise, how can you keep up if you’re unable to pay for mortgage fees? Quite positively, the FHA permits the approval of borrowers with shorter work track records as long as they have supporting documents that prove they’re financially capable.
Ability to pay
One of the most significant determiners in being eligible for an FHA loan is if one can afford to take on mortgage duties on top of existing bills.
It is understood that a borrower’s mortgage payment should not exceed 35% of their income and one’s mortgage payment on top of recurring bills (utility bills, phone bills, etc.) must not exceed 48% of their collective income.
The advent of technology has allowed anyone to evaluate by themselves if they make it by using home loan calculators online. If potential borrowers are unable to meet these standards, it’s best to focus on getting rid of other debts first to fall within those ratios.
Have enough money for a down payment.
The minimum permitted down payment under an FHA mortgage is 3.5%. In general, borrowers will need to save or come up with at least 6% of the property’s total value to account for out-of-pocket expenses and closing costs. Don’t forget that an upfront mortgage insurance premium will be collected as well. This accounts for 1.75% of the property’s value.
Establish a decent credit score.
Compared to conventional loans, the FHA has easier credit scores to meet. If one can obtain a FICO score worth 580, then he or she is eligible for a 3.5% down payment. If he or she can earn at least a 500 credit score, then they will be billed at least a 10% down. It’s also just as noteworthy that lenders have every right to set their own minimum credit scores, so it always pays to make sure one’s credit score is as healthy and intact as possible.
Consider buying a home that doesn’t go beyond FHA loan limits.
When one plans on buying a home that doesn’t exceed FHA’s county-based loan limits, then a borrower’s application becomes much smoother. If you’re planning to pursue an FHA loan application, click the link.