The FHA or Federal Housing Administration is now a part of HUD or House and Urban Development, which are responsible for making home ownership more accessible for more Americans. What is great about the FHA, is that you do not have to have perfect credit or a high paying job. The payments are usually smaller than bank made loans, as well as the down payment needed towards a home is also much smaller than what would normally be accepted.
Qualifying for a FHA loan is surprisingly very easy! You must be able to meet the minimal credit requirements, plan to use the home as a primary residence, and of course can afford to make the monthly mortgage payments, which are often comparable to rent payments. You must be able to show a steady income for three years and have paid your bills on time. There is no limit on the amount of income that is needed to qualify. Instead of making a land lord richer, the average person can put money towards an asset, a home.
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The limits set on FHA loans change periodically and vary according to home markets throughout the country. However, they often vary anywhere from $100,000 to $210,000. A lender should be able to tell you exactly what the limits are in the area you're looking to purchase.
It is also simple to get a FHA loan, especially with the use of the Internet. The process is similar to any other loan, with the addition of a few extra forms to fill out, which your lender will happily provide. You no longer have to meet person to person, but can apply for a loan on-line, by phone or mail. It is now easier and faster to get your FHA loan.
There are many sources that qualify as income for the FHA loan which include unemployment compensation, retirement pension payments, child support, seasonal pay, alimony, Social Security income, savings plans, military pay, part-time pay, bonus pay, and overtime also count. Consistency is more important than income amount when it comes to qualifying for a FHA loan.
The debt-to-income ratio is more forgiving with a FHA loan. For example, while a normal loan would have a ratio of only 28% of your income toward housing and 36% towards housing and long term debt, the FHA loan accepts 29% of your income toward housing and 41% toward housing expenses and long term debt.
There are ways to increase this ratio by demonstrating that you can put more toward housing expenses, can decrease monthly housing expenses, increase your down payment, have substantial cash in savings, have a net worth that can pay the mortgage regardless of income, or have a better than average credit history or limited credit use.
The down payment with a FHA loan must be at least 3% of the purchase price of the home. So if your home costs $200,000, you would need to put down at least $6,000. Private lenders would require 3%-5% with many more qualifying factors. This down payment can be paid with cash gifts or money from a savings club.
You can assume a FHA loan, cutting closing costs and other costs associated with creating a new loan. You often will have a lower interest rate and do not have to go through so many qualifying steps. If you have enough money to support the mortgage, and have some credit, you can generally assume a FHA loan very easily.
If you do not have a large income, but are diligent in paying your bills and have at least some credit, even if it is below average, or even no credit, check out a FHA loan for your specific area and take steps to owning your very own home, and stop paying rent in a crammed apartment community or home that you can't do what you please to it. There are organizations that offer opportunity to all people in all situations and the FHA is one of them. Use it to your full advantage and own your own home, when you thought that could never be a part of your life!
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