 FHA Mortgage Loan Requirements
What is an FHA Mortgage Loan?
FHA stands for Federal Housing Authority. A Federal Housing Authority loan provides low-cost insured home mortgage loans that suit a variety of purchasing options. Whether you're buying a home or want or refinance your mortgage, FHA mortgage loan might be right for you. If you're unsure about your credit rating, or have concerns about a down payment, ENG Lending's FHA mortgages can give you piece of mind with super low closing costs and flexible payment options.
What are the FHA Mortgage Loan Requirements?
To decide if you qualify for an FHA Mortgage Loan, we will look at:
- Your income and your monthly expenses. Standard debt-to-income ratios are 31/43 for FHA refinance loans. These ratios may be exceeded with compensation factors.
- Your credit history (this is important, but FHA's credit standards are flexible). A FICO score of 580 or above is very helpful in obtaining an approval.
- Your overall pattern rather than to individual problems you may have had.
To be eligible for an FHA mortgage, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (31% ratio). Your credit background will be fairly considered. You must also have enough income to pay your housing costs plus all additional monthly debt (43% ratio). These percentages may be exceeded with compensating factors.
Additionally, to meet current FHA loan qualifications you must:
- Have a valid Social Security Number (SSN)
- Be legal resident of the United States
- Be of a legal age to sign on a mortgage in your state. There is no maximum age limit for a borrower.
Even if you are a U.S. citizen, you must have a valid Social Security Number (SSN). An individual Tax Identification Number (ITIN) is not an acceptable substitute for a SSN.
U.S. citizenship is not required for eligibility. When you indicate on your loan application that you hold something other than U.S. citizenship, the lender must determine your residency status from the documentation you provide. If you are a permanent resident alien, you must provide evidence of lawful permanent residency issued by the Department of Homeland Security, Bureau of Citizenship and Immigration Services (BCIS), formerly the Immigration and Naturalization Service (INS).. If you are a non-permanent resident alien, you must show that you are eligible to work in the U.S. by producing an Employment Authorization Document (EAD) issued by BCIS.
Can I get an FHA Mortgage Loan after bankruptcy?
Criteria for FHA loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for two years or more, you are eligible to apply for an FHA mortgage. If you are in a Chapter 13 bankruptcy and have made all court approved payments on time and as agreed for at least one year, you are also eligible to make an FHA loan application.
What are the FHA Down Payment Requirements?
FHA mortgage requirements have a low 3% down payment and the money can come from a family member, employer or charitable organization as a gift. Other loan programs don't allow this.
What types of property are eligible?
While FHA Mortgage Guidelines do require that the property be Owner Occupied (OO), FHA Loan Requirements do allow you to purchase condos, planned unit developments, manufactured homes, and 1-4 family residences, in which the borrower intends to occupy one part of the multi-unit residence.
What is the maximum amount that I can borrow?
The maximum amount for an FHA Mortgage Loans are determined by:
Maximum loan amount: By law, FHA cannot insure loans that exceed certain amounts based on the metropolitan area or county in which you live. The highest maximum FHA home loan right now is $729,750. The lowest maximum amount available in any county is $271,050. To see what the limit is in the county in which you're interested, visit the following site https://entp.hud.gov/idapp/html/hicostlook.cfm. This site lists U.S. territories as well as states.
Maximum financing: Depending on the state where the property is located, the maximum FHA financing will be either 98.75% or 97.75% of the appraised value of the home or its selling price, whichever is lower.
What kinds of loans does FHA offer?
Fixed rate loans - Most FHA loans are fixed-rate mortgages. In a fixed rate mortgage, your interest rate stays the same during the whole loan period, normally 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your monthly payment will be, and you can plan for it.
Adjustable rate loans - Most first-time home buyers are a little stretched financially, so they want payments as low as possible at the beginning. With FHA's adjustable rate mortgage (ARM), the initial interest rate and monthly payments are low, but these may change during the life of the loan. FHA uses the 1-Year Constant Maturity Treasury Index (1 Yr CMT the most widely used index, to calculate the changes in interest rates. An index is a measure of interest rate changes that determine how much the interest rate on an ARM will change over time.
The maximum amount that the interest rate on your loan may increase or decrease in any one year is 1 or 2 percentage points, depending upon the type of ARM you choose. Over the life of the loan, the maximum interest rate change is 5 or 6 percentage points from the initial rate, again depending upon the type of ARM you choose. The advantage of an ARM is that you may be able to afford more house because your initial interest rate will be lower, as will your payment.
Are FHA Home Loans assumable and can they be refinanced?
Yes & yes! One of the greatest advantages of ENG Lending's FHA Home Loans is the ability for the loan to be assumed. This allows the buyer a significant advantage in a high-interest rate market, and affords you an excellent sales advantage over your competition. An FHA Home Loan are also eligible for FHA streamline refinancing, offering you a lower than standard interest rate, which can lower your monthly payment.
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