FHA Mortgage Loans
What is an FHA Mortgage Loan?
FHA mortgage loans are loans that are insured by the Federal Housing Administration (FHA), which makes loans accessible for people with less than stellar credit or a low down payment. Due to the rash of foreclosures and defaults that happened in the 1930’s, the FHA program was created to help stimulate the housing market, and provide lenders with adequate insurance to reduce their risk of loss if a borrower defaults on their mortgage payments.
FHA Home Loan Benefits
FHA mortgage loans are for first-time home buyers, seniors, or borrowers with financial limits on what they can afford.
- A low 3.5% down payment
- Flexible income and credit requirements
- Low closing costs
FHA Home Loan Requirements
- Available only on primary residence occupancy.
- Lawful residency in the U.S. with a valid Social Security number.
- Steady employment history or worked for the same employer for the past two years.
- Minimum credit score of 580 for maximum financing, with a minimum down payment of 3.5%, which can be gifted by a family member.
- Minimum credit score of 500-579 for maximum LTV of 90%, with a minimum down payment of 10%.
- Less than 31% of gross income on front-end ratio, (mortgage payment, HOA fees, property taxes, mortgage insurance, homeowners insurance).
- Less than 43% of gross income on back-end ratio (mortgage payment plus all your monthly debt).
- Must be two years out of bankruptcy and have re-established good credit.
- Must be three years out of foreclosure and have re-established good credit.
- Property appraisal only from a FHA-approved appraiser.