Affordable interest rates and reasonable FHA requirements continue to raise the popularity of this government mortgage program that was founded in 1934. If you are looking for a first time home buyer loan, or if you are coming back into the home buying market after a few years of renting or even unemployment, then there is a good chance you don’ t have the full capital necessary to finance a home on your own with FHA. One of the tools at your disposal is the Federal Housing Administration, or FHA. The FHA is essentially the only remaining subprime lending service still in practice, after the housing bubble crisis of 2007. Here, we’ll go over some of the FHA loan requirements for 2011, as well as some FHA loan guidelines to keep in mind.
The FHA loan requirements for 2011 are fairly straightforward, but understanding them is important to ensure you don’t waste your time if they are not met. One of the first requirements you’ll want to understand is your credit score. Previously, the FHA did not require any type of credit check for loans, but the 2007 subprime lending crisis changed that. Beginning in 2010, borrowers must have a credit score of at least 500 or higher in order to qualify for an FHA loan. To qualify for a 3.5 percent down payment program, the borrower’s credit score must be at least 580. Bad credit mortgage refinancing is not as easy as it was a few years ago; however, FHA continues to make exceptions for borrowers with less than perfect credit who have compensating factors. The main difference is that the FHA underwriter in 2011 may require more equity. Someone with low fico scores may get approved at 90% or 95% LTV, rather than 96.5%.
However, there is a caveat here. The FHA loan requirements are actually lower than those the requirements set by most lenders. Because the FHA does not actually give out the loans themselves (they are given through FHA approved lenders), the requirements of the lender takes precedence over those set by the FHA. This means that if you meet the FHA requirements for 2011 but not those of the lender, then you will not qualify for that lender’s loan. Most FHA approved lenders require a credit score of at least 620, although each lender has its own minimum.
A few FHA loan guidelines to keep in mind are what type of down payment you will have to make, as well as what the ratio of your debt to income is. The typical minimum down payment for an FHA loan is 3.5 percent, which is the smallest down payment available aside from USDA home loans and VA loan programs. There is, of course, the option to place a larger down payment. Your debt to income ratio is a comparison between your gross monthly income (before taxes) and the amount of money you spend on the various debts you have.
4 comments so far
How long after a bankrupcy can you qualify for loan is it 2 or 3 years?
Technically FHA lenders can approve you for a government insured mortgage after the bankruptcy has been discharged for 24 months, but the underwriters are looking for reestablished credit and a great payment history since the BK.
Can we use FHA on a second home -not our primary home?
My question is how can I prove to a FHA lender that I have made payments on a previous home that I purchased on a land contract when I made payments with cash, I never bothered to get a check book since I pay almost all my bills online through my bank, the individual I made payments to would give me a receipt but the receipts aren’t good enough for flagstar bank they want cancelled checks, I also had a letter from that individual stating I made my payments on time and the amounts that I paid, I could get my bank statements but that only shows a cash withdrawal I’m beside myself I don’t know what else to do this is the only thing thats keeping me from closing on this new home. – Thanks T. Crorey
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