FHA QUALIFICATION - Do I Qualify?
Basic FHA Qualification
Who qualifies for an FHA Loan ? Many Borrowers are FHA candidates - First Time Buyers, bad credit borrowers, Borrowers with no credit history or FICO Score, mortgage holders needing to get out of risky ARM's or Borrowers with poor FICO scores. How do I qualify for an FHA loan? 1. Need to prove identification - Have a valid social security number, must be a resident of the US, and of legal age to sign on a mortgage in your State. 2. Need to be Employed 2 years - Working for at least 2 years - with the same employer, verify with pays stubs, 1099, w2... 3. Minimum FICO may be needed - You now need a 550 credit score with some lenders; others still have NO minimum FICO credit score for an FHA loan - this will vary from lender to lender so inquire with each specific lender. Your loan officer will still always run a credit check. 4. Good standing instead of FICO - Credit should be in good standing - less than 2 - 30 day lates within the last 2 years. Most FHA lenders are not concerned with your credit score, rather your last 2 year bill paying history. 5. Bankruptcy ( chapter 7 ) - OK as long as your discharge date is over 2 years old. 6. Foreclosure - ok, but it must be 3 years old, with no late payments during the LAST 3 years. 7. Cash-out refinances loans over 85% LTV will now require a minimum 580 credit score 8. 29% Front-end ratio - Your monthly PITI can be 29% of your gross income. Example: you make $3200 gross per month - your mortgage payment cannot exceed - $928 ( principal, interest, tax and insurance) calculation: 3200 X .29=$928 9. 41% back-end end ratio - Total housing bill which is PITI + credit obligations longer than 10 months, can be 41% of your gross monthly income. 10. NON-TRADITIONAL CREDIT ACCEPTED - This means you can still get an approved FHA loan even if you've never had a credit card, auto loan, student loan, or previous mortgage - items that traditionaly appear on your credit report. Find out about:Non traditional credit and FHA Mortgages
FHA Loan Qualification Overview
Qualifying for an FHA loan is much easier for most borrowers to qualify for as long as you meet the basic requirements. As long as you can prove steady employment for 2 years and have payed bills on time for 2 years as well, you should be ok. What is the lowest credit score for FHA qualification? The answer is there is no minimum FICO score set forth by the Federal Housing Administration. Keep in mind however, FHA doesn't actually fund the loan, they simply insure the loan if you default. Recently, individual lenders who actually originate, process and fund FHA loans may require minimum FICO scores of at least 550 in order for you to qualify. How will you know if you can qualify for an FHA loan based on your FICO score?. Very simply you need to inquire. Contact a few FHA lenders and ask if they now require aminimum FICO score. So, FICO score will generally not be an issue as FHA looks primarily at the last 24 months to assess credit worthiness - FHA requires you to be in good standing over the last 2 years, allowing two - 30 day lates on monthly credit card auto or other revolving credit. This helps those with sub prime credit scores ( below 680) qualify for decent interest rates - without the FHA program borrowers could only qualify for ridiculously high interest rates. You'll find that 30 year fixed FHA interest rates are generally the same as conventional mortgage interest rates. ***Don't buy more house than you can afford - in other words, if you qualify for a $250,000 mortgage consider a buying a home under that amount, it will allow you more financial breathing room at the end of the month.** HINT - KNOW WHAT MORTGAGE PAYMENT YOU CAN REALISTICALLY AFFORD ! SEE: Affordability CalculatorFHA Loan Candidate Profile
FHA QUALIFICATION - An FHA loan is perfect for you if you've had periods of financial difficulty in the past but have managed to 'turn around' your financial situation. Maybe your income has increased because of a job promotion; maybe your husband or wife has begun working creating an 'extra source of income'. These factors will equalize a poor credit score by lowering your debt to income ratio **FHA lenders truly look at a borrowers 'offsetting factors' rather than rely soley on 'credit scores' when assessing your risk as a borrower. ** Becoming a homeowner is a dream that FHA loans provide to borrowers who would otherwise 'not qualify' for a conventional loan.FHA Rules Different Between Lenders
FHA is a government home loan program that requires no minimum FICO...however - Lately, individual mortgage brokers may set minimum FICO scores in order for you to qualify. This discretion is left to the brokers in light of the recent mortgage meltdown, no doubt. Typically you may see some brokers requiring at least minimum 580 FICO to get you qualified. Not all brokers will require a minimum FICO...so inquire about this. Still, FHA is perhaps the best option available for anyone with damaged credit looking for a mortgage; especially if you are actively repairing your damaged credit and are headed towards proving "positive credit management". Bad credit candidates should definitely give it a shot; if you can prove you have been paying bills on time and have steady income - go for it.Contact an FHA Lender
Which lenders offer FHA? Just about every major linding institution is an FHA approved lender FHA Qualification is an easy process - If you fit the above requirements you should contact a FEW lenders and inquire about FHA programs. If your credit is damaged but you can explain the situation and provide 'offsetting factors' like increased income, you will have no problem receiving an FHA loan.More FHA loan credit requirements.