FHA - HOME LOAN PROGRAM

FHA, also referred to as, Federal Housing Administration, is a government backed loan. The loans are usually easier to qualify for and commonly used by people of less than perfect credit and lower income.

FHA loan program is one of the most popular loan programs available. Home buyers with little money available for down payment, can take advantage of FHA low down payment rates. FHA loan program offers you the ability to purchase a home with as little as 3 percent down. FHA loan programs are highly recommended for first time home buyers. However, FHA is not a loan provider; instead, it insures the loan provided to you by your lender. The lender is insured and paid through FHA insurance fund, if you default on your payments.

 

Who qualifies?

In order to qualify for a FHA loan, you will need:

• Satisfactory credit history

The lender will view your credit for delinquent accounts, collections and involuntary closed accounts. If your credit is poor, you most likely will not qualify for the FHA program.

• Established employment and employment history

The lender will view your employment history to verify your current position and your capabilities to repay your loan. FHA prefers individuals with two or more years at current position and/or in the same field.

• You must be able to pay the required closing cost and down payment. The closing cost normally range from 2-3% of home value and the down payment will be at the least 3% of the home value.

How much will I qualify for?

FHA requires your mortgage cost to be less than 29% of your gross monthly income. This amount includes PITI (principal, interest, tax, and insurance). To explain:

 

Your monthly income is multiplied by .29, which equals your maximum PITI. If for example your monthly income is 2500.00, your maximum allowed PITI equals $725.00

 

FHA requests that your mortgage and combined debt do not exceed 41% of your income. Debt is to include: mortgage expense, car notes, credit cards, other lines of credit, Child Support, Alimony, loans, etc.

 

Nevertheless, some of the above criteria may vary depending on lender.

 

 

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