Do I Qualify for an FHA Loan?
If you have a 600 credit score and your property isn’t a space ship on 3000 acres of land you probably qualify for an FHA Loan. It’s about the only option left for people who aren’t the “Perfect Borrower”. Mortgage rates are moving up but they are still close to 5% and that 600 credit score limit could be 700 tomorrow.
If your FICO score is 600 or better, now is the time to act! Lender guidelines get tougher everyday and rates are on the way up. If you don’t act now you might not qualify tomorrow!
If you do not typically fit the requirements for most home mortgage loans, you may still be eligible for an FHA loan. This program serves to help lower-income people, first-time home buyers, and people with less-than-perfect credit achieve their goal of home ownership. The following guidelines will help you understand FHA loan eligibility:
- You may only have one FHA home mortgage loan at a time.
- You have to be able to make a 3% down payment, some or all of which can come from gifts.
- Your monthly payments must be about 30% of your income, due to a higher debt-to-income ratio than conventional home mortgage loans.
- Some credit history is required, though the FHA accepts such evidence of debt responsibility as cell phone bills and utility bills.
- You must have 2 years of income stability and prove that you have paid most of your bills on time.
- Late payments in the past will not disqualify you from taking out a home mortgage loan. The FHA will overlook some late payments if your overall history shows that you usually make your payments on time.
- Any judgments against you must be paid before closing an FHA loan.
- The FHA may overlook any items you have in collections if your credit history meets their requirements.
- Any delinquent debt owed to the federal government (such as tax liens or student loans) will make you ineligible for an FHA loan.
- You must have 12 months of good credit after any past Chapter 7 bankruptcy.
- You must have 1 consecutive year of good credit after any past Chapter 13 bankruptcy, in addition to your adherence to the payment plan.
- You must have 3 consecutive years of good credit after any past foreclosure.
- The FHA offers Self-Employed Income Mortgage Loans to the self-employed, who may have trouble proving steady income.
- You can transfer an FHA loan on to a buyer or assume it from a seller, with the permission of the FHA.
- The VA offers veterans a similar, though in some ways superior, home mortgage loan program. To find out if you qualify, or to check out the benefits of the VA loan, click here.
In addition to personal qualifications, the FHA has a set of standards that must be met by the property you want to purchase with your home mortgage loan:
You must intend to live in the property.
- Commercial properties and cooperatives are not eligible for an FHA loan.
- Single family homes, small rental properties (up to 4 units), manufactured homes, modular homes, and condos may qualify.
- The property does not qualify if the seller has acquired the property within the last 90 days.
- If the home is more than 1 year old and you would like to make improvements up to $5,000, then you may qualify for a 203(k) loan. This type of FHA home mortgage loan is used to purchase and remodel a home.
Call Homestar Financial with any questions you may have about the qualification process. To find out what the limit for an FHA home mortgage loan is in your area, you will need to visit the HUD web site at https://entp.hud.gov/idapp/html/hicostlook.cfm Choose your State, County and “FHA Forward” from the drop downs and click the send button.
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