FHA

What it takes to qualify for FHA:

FHA is the most credit friendly loan in the marketplace.

At the time of this report most lenders will go down to a 620 middle credit score for FHA.  There are still a few lenders doing manually underwritten FHA loans down to a 550 credit score.

 

Chapter 7 Bankruptcy:  FHA has the friendliest bankruptcy seasoning guide-lines of any mortgage program available.  They will require two years out of a bankruptcy discharge before you can get a new loan.  You will also need to reestablish credit after the bankruptcy.

 

Chapter 13 Bankruptcy:  You need to have at least 12 months of payment history on your Chapter 13 with no late payments.  You will also need permission from the court or the trustee.

 

Foreclosures:  FHA wants 36 months of seasoning after a foreclosure before you can get a new FHA loan.

 

Clear CAIVRS:  The government doesn’t like it when you have defaulted on a government insured loan.  They have a database called CAIVRS that they check to see if you have ever defaulted on any government insured loans. These can be student loans, or other mortgages.

 

Gifts:

FHA underwriting guidelines will allow gifts from family members or close relatives for the entire down payment.

 

Reserves:

FHA generally does not require cash reserves after the loan closes. In other words, there isn’t a minimum monthly amount of funds required to be left in the bank after the loan closes.

 

Mortgage Insurance:

FHA charges their own mortgage insurance on every loan they make.  For a 30 year mortgage FHA will charge 0.85 of 1% of the loan amount, divided by 12 every month.  So for a $100,000 loan your monthly mortgage insurance payment to FHA would be $71.

 

FHA will also charge an upfront mortgage insurance fee that they call a funding fee.  This is paid at closing.  This funding fee at the time of this writing is 1.75% of the loan amount.  This fee is added to the loan amount at the time of closing by FHA.  It doesn’t come out of the buyer’s or the seller’s pocket at closing.

 

Maximum Loan:

For each county in each state FHA will have a maximum loan amount.  You can find out the maximum loan amount for your country by going to this web site: https://entp.hud.gov/idapp/html/hicostlook.cfm.

 

Advantages of FHA:

Low down payment.  The FHA loan will finance 96.5% of the purchase price.

 

It’s credit friendly!  This is one of the most forgiving loans in the mortgage market when it comes to lower credit scores, or other credit challenges.

 

Low rates!  The FHA program has very competitive interest rates that rival conventional loans.

 

Disadvantages of FHA:

The FHA loan requires a down payment of 3.5%.

The FHA loan has a maximum loan amount in your county.  Please refer to the link listed above in this article to see the limits in your county.

 

Contact us today to find out if an FHA loan is right for you.

 

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