FHA Mortgage Loan Requirements

FHA Mortgage Loans are a great way for people who don’t have the 20% down payment that a Conventional mortgage requires.  The barriers to buying a home are lower, and that is designed to help more people get out of the trap of renting and fulfil the dream of owning their own home.  Just because the requirements are LOWER, though, doesn’t mean that anyone will qualify.  There are FHA Mortgage Loan Requirements that you have to meet to borrow through the Federal Housing Authority.

  1. 3.5% For a Down Payment

Opposed to a Conventional Loan that requires a 20% down payment, the FHA Loan only requires you to come up with a down payment of 3.5%.  That helps people who have been bitten by high rental prices, student loan bills, or credit card debt to be able to buy a home earlier.

  1. 500 Or Above Credit Score

OK, this one is a little different.  A 500 credit score isn’t all that high, but this program lets people who may have had credit strikes in the past still buy a home.  If your credit score is this low, though, 3.5% for the down payment may not be enough, and you may be asked to put down up to 10%.  If you get that credit score up to 580, you can get back to that 3.5% down payment.  We have given a few examples of how to raise your credit score in the past, so give those a try.

  1. PMI

The federal government is backing these loans, so you have to give them some assurance that you will pay them back.  That’s where PMI comes in.  PMI is Private Mortgage Insurance.  It’s also referred to as MPI, or a Mortgage Insurance Premium.  PMI is an additional cost that you pay monthly and doesn’t go towards paying your mortgage down.  While it stinks to pay extra, it is necessary to make sure that the program is viable.

  1. 59% DTI

Debt-to-income, or DTI, is the way that banks and lenders determine your financial health along with your credit score.  It’s a measurement of your debts against your income at its heart.  You pile up what you make against what you owe.  If you owe 60% of your paycheck to your bills right off the top, you are going to have trouble securing a loan.  That’s because the bank wants to know that you will be able to repay the loan.

  1. Appraisal is Important

While we can get some mortgages done without an appraisal, like an FHA Streamline, most new FHA Loans require an appraisal to ensure that the government is loaning you money for a home worth the value.

Generally, FHA loan programs only insure loans up to the maximum limit.  This is determined by county. Most areas have a limit of $417,000, but some high-cost areas can lift the limit to $636,150. Hud.gov can show you the limits for your county.  An FHA Streamline loan, which is an FHA Refinance for current FHA borrowers, does not have this limit or require an appraisal.

Call The Home Loan Expert Team in St. Louis at (314) 781-9700, Chicago at (773) 770-4727, Indianapolis at (317) 550-1515 or Nashville at (615) 810-8555. You can always apply online at www.thehomeloanexpert.com, and we’re also open on Saturdays and will come to you to help close your loan. We work hard to make it easy on you.  Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?

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