There’s no single path to becoming a homeowner. Sometimes potential buyers know exactly the type of home they want, what town or neighborhood they want to be in and they know exactly what they can afford. For these buyers, qualifying for a mortgage isn’t usually that difficult. But for many people looking to achieve the dream of home ownership, qualifying for a mortgage isn’t always easy.
That’s why there are loan programs that give a boost for those who may have difficulty qualifying for traditional mortgages. Among these programs are FHA loans. These are loans that are insured by the Federal Housing Administration and we can help you get one at Cliffco Mortgage Bankers.
Cliffco Can Help You Fine the Loan You Need
Whether you’re looking for a traditional mortgage, an FHA loan, loans from other government agencies such as VA loans, or if you’re looking to tap into your home’s equity through a reverse mortgage loan, Cliffco can guide you through the entire process. We often meet prospective buyers who need some extra help securing loans, so we want to tell you what you need to know about qualifying for FHA loans.
The Basics of FHA Loans
The Federal Housing Administration is a part of the U.S. Department of Housing and Urban Development. According to their website, “FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals.” They’re the largest insurer of mortgages in the world, insuring over 47.5 million properties. FHA loans come from private lenders and are insured by the agency.
According to Zillow, FHA loans are popular, particularly among first time buyers because they can allow for lower down payments even if those buyers have a low credit score. Buyers are able to purchase a home with as little as 3.5 percent down even with a credit score as low as 580. Potential buyers with lower credit scores can still potentially qualify with a larger down payment.
Requirements to Qualify for FHA Loans
The minimum credit score and 3.5 percent down payments are just two of the requirements. Borrowers also must have a steady employment history and have worked for the same employer for at least two years. They also must have lawful US residency, be of legal age to sign a mortgage document (which varies by state) and have a valid Social Security card.
Buyers also must have a property appraisal done by an FHA approved appraiser. The 3.5 percent down payment can be paid for by a gift from a family member. Borrowers usually need to be at least two years out of bankruptcy and a minimum of three years out of foreclosure and have to have re-established good credit.
The income you’ll use to pay the mortgage, which includes mortgage payments, homeowners association fees, property taxes and mortgage insurance, (this is known as front-end ratio) usually needs to be less than 31 percent of your gross income. It can sometimes go as high as 40 percent, according to Zillow. The back-end ratio which is the percentage of your debt such as car payments, credit card bills, student loans, etc. needs to be less than 43 percent of your gross income but can sometimes go as high as 50 percent.
Talk to Cliffco About FHA Loans
If you believe an FHA loan is right for you, talk to Cliffco. We’ll help you determine if you qualify and how much of a down payment there will be. We can help you become a homeowner. Contact Cliffco today.