FHA Home Loans

In 1934, the Federal Housing Administration (FHA) was established to improve housing standards and to provide an adequate home financing system with mortgage insurance. Now families that may have otherwise been excluded from the housing market could finally buy their dream home. FHA does not make home loans, it insures a loan; should a homebuyer default, the lender is paid from the insurance fund. Buy a house with as little as 3.5% down. Ideal for the first-time homebuyers unable to make larger down payments. The right mortgage solution for those who may not qualify for a conventional loan. Down payment assistance programs can be added to a FHA Loan for additional down payment and/or closing cost savings.

Your loan approval depends 100% on the documentation that you provide at the time of application. You will need to give accurate information on:

Employment

• Complete Income Tax Returns for past 2-years
• W-2 & 1099 Statements for past 2-years
• Pay-Check Stubs for past 2-months
• Self-Employed Income Tax Returns and YTD Profit & Loss Statements for past 3-years for self-employed borrowers

Savings

• Complete bank statements for all accounts for past 3-months
• Recent account statements for retirement, 401k, Mutual Funds, Money Market, Stocks, etc.

Credit

• Recent bills & statements indicating account numbers and minimum payments
• Landlord's name, address, telephone number, or 12- months cancelled rent checks
• Recent utility bills to supplement thin credit
• Bankruptcy & Discharge Papers if applicable
• 12-months cancelled checks written by someone you co-signed for to get a mortgage, car, or credit card, this indicates that you are not the one making the payments.

Personal

• Drivers License
• Social Security Card
• Any Divorce, Palimony or Alimony or Child Support papers
• Green Card or Work Permit if applicable
• Any homeownership papers

Refinancing or Own Rental Property

• Note & Deed from any Current Loan
  Property Tax Bill
  
• Hazard Homeowners Insurance Policy
  
• A Payment Coupon for Current Mortgage
  
• Rental Agreements for a Multi-Unit Property

The main difference between a FHA Loan and a Conventional Home Loan is that a FHA loan requires a lower down payment, and the credit qualifying criteria for a borrower is not as strict. This allows those without a credit history, or with minor credit problems to buy a home. FHA requires a reasonable explanation of any derogatory items, but will use common sense credit underwriting. Some borrowers, with extenuating circumstances surrounding bankruptcy discharged 3-years ago, can work around past credit problems. However, conventional financing relies heavily upon credit scoring, a rating given by a credit bureau such as Experian, Trans-Union or Equifax. If your score is below the minimum standard, you may not qualify.

Your monthly costs should not exceed 29% of your gross monthly income for a FHA Loan. Total housing costs often lumped together are referred to as PITI.

P = Principal

I = Interest

T = Taxes

I = Insurance

Examples:

Monthly Income x .29 = Maximum PITI
$3,000 x .29 = $870 Maximum PITI

Your total monthly costs, or debt to income (DTI) adding PITI and long-term debt like car loans or credit cards, should not exceed 41% of your gross monthly income.

Monthly Income x .41 = Maximum Total Monthly Costs
$3,000 x .41 = $1230
$1,230 total - $870 PITI = $360 Allowed for Monthly Long Term Debt

FHA Loan ratios are more lenient than a typical conventional loan.

Yes, generally a bankruptcy won't preclude a borrower from obtaining a FHA Loan. Ideally, a borrower should have re-established their credit with a minimum of two credit accounts such as a car loan, or credit card. Then wait two years since the discharge of a Chapter 7 bankruptcy, or have a minimum of one year of repayment for a Chapter 13 (the borrower must seek the permission of the courts). Also, the borrower should not have any credit issues like late payments, collections, or credit charge-offs since the bankruptcy. Special exceptions can be made if a borrower has suffered through extenuating circumstances like surviving a serious medical condition, and had to declare bankruptcy because the high medical bills couldn't be paid.

An FHA Home Loan is a mortgage insured by the Federal Housing Administration (FHA). These loans are designed to make homeownership more affordable, particularly for first-time buyers or those with lower credit scores. They offer competitive interest rates, lower down payment requirements, and flexible credit standards.

FHA loans are available to individuals who plan to purchase a primary residence. Typically, you’ll need a credit score of 580 or higher to qualify with a 3.5% down payment. If your credit score is between 500 and 579, you may still qualify with a larger down payment of 10%. Additional factors, such as your income, debt-to-income ratio, and employment history, will also be considered.

The minimum down payment for an FHA loan is 3.5% of the home’s purchase price for borrowers with a credit score of 580 or higher. If your credit score falls between 500 and 579, you may need to provide a down payment of 10%.

No, FHA loans are specifically intended for primary residences. The property you purchase must be your main home, and you’re required to live there for at least one year.

FHA loans require mortgage insurance to protect the lender in case the borrower defaults. This includes an upfront mortgage insurance premium (UFMIP), which is typically 1.75% of the loan amount, and an annual premium that is added to your monthly payment. Bianca Jacobs will help you understand these costs and how they fit into your budget.

FHA loans can be used to purchase various types of properties, including single-family homes, multi-family properties (up to four units), condos, and manufactured homes. The property must meet FHA standards and pass an appraisal to ensure it is safe and livable.

FHA loans offer several benefits, including lower down payment requirements, more flexible credit standards, and competitive interest rates. They are particularly advantageous for first-time buyers or those with limited savings or less-than-perfect credit.

Yes, FHA loans can be used to refinance an existing mortgage. The FHA Streamline Refinance program offers a simplified process with fewer requirements, making it a popular option for homeowners who want to lower their interest rate or monthly payment.

FHA loan limits vary depending on the county where you plan to buy a home. These limits are based on the median home prices in the area. Bianca Jacobs will help you understand the loan limits in your location and ensure you’re shopping within your budget.

The first step is getting pre-approved. Pre-approval helps determine your budget and shows sellers that you’re a serious buyer. Bianca Jacobs will guide you through the pre-approval process, help you gather the necessary documents, and ensure you’re fully prepared for your homebuying journey.

FHA loans are assumable, meaning that when you sell your home, the buyer may be able to take over your loan with the same terms. This can be an attractive feature if interest rates have risen since you purchased your home.