What are the Requirements of an FHA Mortgage?
Posted by : Admin
If you need to qualify for a home loan with low or moderate income, an FHA loan might be the right option. This is a unique home loan that has been furnished by the Federal Housing Administration. There are a few key points that people should keep in mind when it comes to an FHA loan.
The Benefits and Requirements of an FHA Loan
A few key points regarding the requirements of an FHA loan include:
- Stable employment history (in same industry) or the same employer for a minimum of two years.
- Down payment of at least 3.5 percent (can be a gift).
- Home must be a primary residence.
- Property appraisal conducted by an FHA-approved appraiser.
- Front-end ratio of less than 31 percent of gross monthly income, which includes mortgage payment, homeowners insurance, property taxes and HOA fees.
- Back-end ratio of less than 43 percent. This includes your mortgage payment, along with monthly debt obligations.
- Minimum credit score of 640 (lenders may require a higher FICO score).
- Must be at least three years past foreclosure or two years out of bankruptcy, if applicable.
The benefits of an FHA loan include:
- Down payment as low as 3.5 percent.
- Down payment and closing-cost money can be gifted from a family member.
- Easier to qualify with underwriting that focuses on job security, employment and income.
- No prepayment penalty.
- Closing costs can be rolled into your loan.
- FHA loans are assumable, which may be a positive selling point in the future.
- FHA loans are good for good credit/income borrowers who don’t have liquid funds for down payment.
Keep in mind, the loan comes from an FHA-approved lender, and it includes a 1.75 percent upfront mortgage insurance premium (when compared to the total value of the loan) in addition to monthly mortgage insurance premiums. While this does add to the cost of the loan, it provides an effective loan option with a low down payment.
The Benefits of Using FHA Mortgage Lenders
Those who are interested in an FHA loan should note the biggest benefits of using FHA mortgage lenders, which include:
- Better mortgage terms related to interest rates and money down
- A smoother mortgage application process
- A trained professional who knows how to navigate the FHA system, reducing stress and paperwork
Contact Mortgage Investors Group Today
If you are looking to learn more about an FHA loan, contact Mortgage Investors Group today!
