The Federal Housing Administration - FHA was established in 1934 to improve the construction and financing of housing. A part of the United States Department of Housing and Urban Development (HUD), FHA provides mortgage insurance on single-family, multifamily and manufactured homes throughout the United States. The FHA doesn't actually lend you money for a mortgage. FHA is a mortgage insurance program that protects the lender from loss in the event of default by the borrower by insuring the full amount of the loan. The lender bears less risk because FHA will pay a claim to the lender in the event of a homeowner's default. The borrower pays for that guarantee through mortgage insurance premium payments to the FHA.
An FHA loan requires that you pay two types of mortgage insurance premiums - an Upfront Mortgage Insurance Premium (UFMIP) and an Annual MIP (charged monthly). The Upfront MIP is equal to 1.75% of the base loan amount and can be paid by the buyer, seller or the most used option is to roll it into the mortgage. The Annual MIP payments are made monthly and range from 0.45% to 1.05% depending on the loan amount, length of the loan and the original loan-to-value (LTV). The typical Annual MIP cost is usually 0.85% of the loan amount.
For borrowers interested in buying a home with an FHA loan with the low down payment amount of 3.5%, applicants must have a minimum credit score of 580 to qualify. If you have a credit score of 500-579 you still may be able to obtain an FHA loan, you would need to put 10% down.
Here are some other FHA loan requirements, which are set by the Federal Housing Authority:
Borrowers must have a steady employment history or worked for the same employer for the past two years.
Borrowers must have a valid Social Security number, lawful residency in the U.S. and be of legal age to sign a mortgage.
Borrowers must pay a minimum down payment of 3.5% however the money can be gifted by a family member or government agency.
FHA loans are only available for primary residence occupancy.
Borrowers must have a property appraisal from a FHA-approved appraiser.
Borrowers front end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance and homeowner's insurance) should be less than 31% of ther gross monthly income and their back end ratio (mortgage plus all monthly debt such as car payments, credit card payments, student loans etc.) should be less than 43%. That being said I've personally had FHA loans approved with a back ratio of 57% due to compensating factors. I'll be happy to explain this scenario for you.
Typically borrowers must be two years out of bankruptcy and have re-established good credit. Exceptions can be made if you are out of bankruptcy for more than one year if there were extenuating circumstances beyond your control that caused the bankruptcy and you've shown that you can manage your money in a responsible manner.
Typically borrowers must be three years out of foreclosure and have re-established good credit.
FHA loan programs include:
203b - Fixed Rate Program with terms of 10-30 years
203k - Purchase and Rehabilitation program
251- Adjustable Rate Program - Available as 1,3,5,7 and 10-year adjustable rate.
234c - Condominium Program
With hundreds of mortgage programs available, let us show you how we can save you $$$$ on your next mortgage!
Company NMLS: 2366709
www.nmlsconsumeraccess.org
3001 Polar Lane, #502,
Austin, TX 78613
Phone: 512-299-4965
epaulson@gfmortgages.com
NMLS: 380212
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