The Real Story…
News & commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth
FHA Loans…
It wasn’t too long ago that FHA Loans had a bit of a bad rep … No more. Gone are the days of the hard to close, difficult inspections, petty issues which made sellers and even buyers avoid them. The new FHA Loan is perhaps the best deal out there for most buyers… great rates, low down payment requirements and other considerations as well.
FHA loans are the easiest type of real estate mortgage loan to qualify for. The FHA guidelines for loan qualification are the most flexible of all mortgage loans that require less than 5% down payment. FHA Loans require 3.5% down.
What makes the FHA Program unique is the variety of benefits it offers to borrowers, particularly First Time Home Buyers. When compared to a conventional loan, FHA becomes a much better deal for borrowers.
Key FHA Benefits
- 3.5% Down Payment
- Low monthly mortgage insurance
- Low, government-capped closing costs
- Relaxed credit score requirements
- Quicker qualify post-bankruptcy
- No minimum or maximum income requirements
FHA Allows for a Blemished Credit History
In today’s tight lending environment, an FHA loan is often the best choice for borrowers with past credit issues. Many borrowers find it much easier to qualify for an FHA Loan. Borrowers can have lower FICO scores, some blemishes on credit and don’t need to put as much money down.
- Lower FICO Scores OK – FICO scores can be lower for FHA than they can with a conventional loan.
- Bankruptcy – The FHA only requires a 2 year waiting period after a bankruptcy. Just 1/2 of the 4 year waiting period for a conventional loan.
- Foreclosure History – FHA required a 3 year waiting period after a foreclosure compared to the 4 year waiting period for a conventional loan.
Following are the basic FHA loan qualification guidelines:
- Two Years of steady employment, preferably with same employer.
- Last two years Income should be the same or increasing.
- Credit report should typically have less than two thirty day lates in last two years with a minimum credit score of 580 or higher or no credit score at all.
- Bankruptcies must be at least two years old, with perfect credit since discharge.
- Foreclosures must be at least three years old, with perfect credit since.
- Your new mortgage payment should be approximately 30% of your gross (before taxes) income.
These are some of the most basic of FHA guidelines for qualifying for a FHA loan. If you have answered yes to most of these statements, you probably qualify for a FHA mortgage loan.
With FHA Loan Limits in Jefferson, Shelby & St Clair Counties set at $271,050.00, FHA is an ideal vehicle for many people to take advantage of the current low interest rates and highest housing affordability index in the past 30 years.
