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Barbara's Blog

FHA LOANS

December 14th, 2021 11:02 AM by Barbara Doeringer

A mortgage the Federal Housing Administration backs is known as an FHA loan. These loans are unique as they are helpful for first-time homeowners because they offer a combination of a lower down payment requirement and lower credit score standards.

The minimum credit score for an FHA loan approval is 500, which is much lower than lender requirements for traditional mortgages.  But a lender may still have higher standards for qualifications since these loans are not from the government directly.  

The minimum down payment depends on the credit score.  It can be anywhere from 3.5% to 10%, but still lower than conventional loan requirements.  Also, debt-to-income ratio and total mortgage payment income ratio are considered.  The debt-to-income ratio (DTI) is a measure of your income before taxes that you spend on your debt payments every month, such as rent, credit cards, car payments, etc.  The highest allowed for approval is 50%.  The PTI ratio is the measure of the potential monthly mortgage payments compared to your monthly income.  That can be as high as 40%.  

There are some income requirements such as at least two credit accounts established and in good standing; no delinquent federal debt or judgments; and verification of any cash gifts from family members or friends for down payment.  

All FHA loans must be for a primary residence and cannot be used for an investment or flip property.   But it can be a single-family, multifamily if you occupy one unit or a manufactured home on a permanent foundation.   

You do not have to be a first-time buyer to qualify for an FHA loan which is what many borrowers think.  There are many creative loan packages for different circumstances so it is wise to work with a realtor who can help you connect with the right lender to fit your personal needs.  We are ready to help you!!  

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Posted by Barbara Doeringer on December 14th, 2021 11:02 AM

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