If you are planning on buying a home, then it is to your benefit to look at what FHA offers and what are the FHA loan requirements.
Many people in America have benefited by owning their own homes thanks to FHA home loans.
They have been instrumental in providing housing especially for middle income and low income families and the elderly.
First of all what is FHA? The Federal Housing Authority (FHA) is a government agency created to provide insurance protection to lenders who provide mortgages to homeowners.
Their insurance helps individuals who might not meet the mainstream lenders loan requirements, qualify for a home loan.
FHA is designed mostly for first time buyer home loans.
The basic requirements are: You must have a valid Social Security Number (SSN) You must be a legal resident of the USA Must be of legal age to sign the mortgage in your state.
To qualify for this type of loan you will need to fulfill the following FHA loan requirements before you can be considered: Credit History Unlike the traditional lenders, under FHA loan the lenders can build a credit history based on utility payments, rental payments, auto insurance payments, and other payments that don't appear in credit files.
The bottom line is that you may be able to buy your home with a low credit score which currently stands at 580.
They expect you to have at least a good history of timely payments within the last two years and have no arrears in your payments.
You will not qualify for a FHA loan if you are in default on your student loan.
Income The loan amount will depend on your income and the ability to make the installments.
They require that your mortgage, property tax and insurance should not exceed 31% of your monthly income with your total debt payments not exceeding 43%.
They are very observant of the ratio of your income and monthly expenses.
Deposit You will require a minimum of 3% cash on hand for the deposit and closing costs.
Collateral Your home which will be the collateral should be valued at least 3% more than the loan amount.
FHA loan requirements are more generous than conventional loans however you must meet their criteria to qualify for a home loan.
It is important to take note that all lenders are not necessarily FHA approved.
They have to be approved to offer the FHA option.
As you interview prospecting lenders ask if they are FHA approved before you start negotiating and discussing the FHA loan requirements.