FHA Loans – What you need to Know

FHA loans are not really loans. They are guarantees of loans to those who qualify for the FHA loan criteria. There are certain guidelines that must be met for the FHA to guarantee the loan. The homeowner must have at least a 3.5% down payment and must have been through bankruptcy or have been foreclosed on and they must have either poor credit or fair credit.

The lenders that are FHA approved are insured against losing their money in case the home buyer defaults and does not pay for their loan. FHA  loans are typically used by those who are lower income, handicapped, senior citizens and military families. They can and have been used by many people since the 1930s.

They are used to help those who would not typically have been able to qualify for a loan elsewhere to purchase a home. In addition, they help to stimulate the economy as people purchase homes and thus reduce inventory that is in very abundant supply when the economy is not doing well.

In order to qualify for FHA loans, the person must have a stable work history, be a lawful resident of the United States, possess a valid Social Security number and be at least the age considered legal to hold a mortgage in the state in which they live. These are just the basic requirements needed to be eligible to apply for the loan. There are many requirements in addition that are part of the requirements before and after FHA loans are applied for and approved.

For example, due to the nature of the loan, there are not certain credit scores that must be adhered to in order to qualify for the loan. However, FHA lenders will look at each applicant on an individual basis when making the decision on their application for a loan.

One of the things considered is the debt to income ratio. As for the mortgage payment, the principal as well as interest, property insurance and taxes must be under 31% of the gross monthly income you have each month. The property must meet the standards set by the FHA of course and if the seller does not want to make any repairs, your only other option is to pay for the repairs that must be done at closing. The money will be held until the repairs are made.

For more information about homeowner assistance programs, please visit our “Find A Local Counselor” page, complete the form and we’ll be happy to assist you further.