Are you buying your first home? Getting approved for an FHA loan might be the answer you are looking for to finance your purchase.
But what is an FHA loan?
An FHA loan is a type of mortgage which allows borrowers with lower qualifications than average to get a loan. The Federal Housing Administration (FHA) insures this mortgage. Most first-time home buyers love to avail of this loan since the down payment is as low as 3.5%. Other loans ask for 20 to 30% of down payment.
When you are choosing your loan options, check out the loan requirements of an FHA loan as well as its pros and cons to see if it fits you.
FHA Loan Requirements
An FHA loan helps all people in all kinds of income levels to get their own homes because the government guarantees the loan payment. There’s no minimum income required for a person to qualify for the FHA loan compared to other types of mortgage loans. However, you need to show that you have the means to repay the loan. Here are some of the FHA loans Dallas requirements, so you know if you qualify or not.
For the past two years, you should have worked for the same employer or have a steady employment history.
Aside from your employment history, your credit score is also important. It is an essential factor in how much down payment you can put on the house and how much interest rate you’ll be getting. If your credit score is 580 or less, you will need to pay a 10% down payment. On the other hand, if you have a higher than 580 credit score, you’ll have to pay a 3.5% down payment.
It is also essential that you are a resident of the U.S.A, have a Social Security number and be of legal age to be allowed to sign a mortgage.
Often, this will depend on your lender. However, the usual mortgage payment (including the property taxes, HOA fees, homeowners insurance and mortgage insurance) is lesser than 31% of your gross income. In addition, your mortgage which includes your monthly debt should be less than around 43% of the gross income.
To avail of an FHA loan, you have to be at least two years out of bankruptcy, as well as having good credit. However, this also depends on your lender if he or she will make an exception.
You should have re-established good credit and a minimum of three years out of foreclosure. But just like the bankruptcy background, some lenders make exceptions. Private lenders, both credit union and bank, have stricter qualifications compared to FHA loans. For this reason, it is recommended that you check the variety of lenders before you decide.
All in all, first-time home buyers are the most popular candidates for FHA loans. Not only that but these are great for those currently building their credit, those who are in high debt and those who don’t have a large down payment.