FHA Loan Requirements Under The Microscope
Mar 16, 2009 in Finance, Personal Finance, Real Estate
FHA loan requirements allow for borrowers who don’t meet the normal banking requirements. The Federal Housing Administration supports Americans who have problems meeting standard mortgage loan requirements - administered by Housing and Urban Development (HUD), the program provides mortgage guarantees on behalf of high-risk borrowers.
FHA Loan Requirements: Required Income
There are no minimum FHA loan requirements for income, so you will be asked to show records of a steady income over three or more years, and you will definitely have to have been paying all your bills on time! FHA loan requirements allow seasonal pay, Social Security income, alimony, child support, retirement pension payments, unemployment compensation, VA benefits, military pay, and rent paid by family to qualify as income. FHA loan requirements may also treat part-time pay, overtime, and bonus pay as part of your income, if you have a track record of getting a steady amount from these sources.
FHA Loan Requirements: Debt-to-Income Ratio
As far as the FHA is concerned, you should use no more than 29% of your income towards housing costs and no more than 41% of your income for all long-term debts together.
In contrast, a regular mortgage lender would generally allow only 28% toward housing and 36% towards the total of all long-term debts.
FHA Loan Requirements: Down Payment
FHA loan requirements specify that you have a down payment of at least 3% of the purchase price of the home, but this cash may be a gift or grant. Private mortgage lenders tend to ask that the borrower’s own funds cover at least 3% of the 3%-5% down payment required, partiularly if other aspects of the loan application are marginal.
FHA Loan Requirements: Credit Score
FHA loan requirements, unlike those of all other financial institutions and mortgage lenders, are free from credit score requirements. What we are saying is, you can get an FHA loan without having a credit history at all. Refer to your FHA lender for details on how to become eligible for an FHA loan if you prefer to pay debts in cash or are too young to have established credit.
FHA loan requirements are refreshingly free from any requirement for a perfect credit score. If you do have bad credit, the FHA allows you to re-establish credit if all judgements and tax liens have been paid, and two years have passed since a bankruptcy has been discharged, or if arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue. On the plus side for those with a past history of housing stress, FHA loan requirements may allow you to qualify for a mortgage three years after a foreclosure or a deed-in-lieu has been carried out.
FHA Loan Requirements - Online Qualification Test
Mark Bennett is an experienced financial commentator for MoneyTalks.com and many other reputable sources of financial information.