Federal Housing Authority loans, commonly referred to as FHA loans, are shrouded with misunderstanding, and first-time homebuyers—including loan officers who do not specialize in FHA loans—may be unaware of all the requirements and exceptions involved.
However, don’t fret! We’ll demystify this all-too-important home buying program and fill you in on all the details that will have you feeling more confident and well-informed. Let’s get started…
What is an FHA Home Loan good for?
For many first-time homebuyers, an FHA home loan makes buying a home much easier, in part because of flexible terms and less-stringent borrowing requirements such as relaxed income and credit guidelines, a low minimum down payment, and the allowance of a higher debt-to-income ratio.
How much is required for a down payment?
The FHA loan offers first time home-buyers the ability to give as little as 3.5% of the home’s purchase price for a down payment. This is the perfect loan for people that are having a hard time saving enough money for a larger down payment.
Is there a minimum income requirement to qualify for an FHA loan?
FHA loans don’t have a minimum income requirement. However, the Federal Department of Housing does require that borrowers prove they’ve had a consistent source of income. The FHA income guidelines tend to focus more on the stability of income and the ratio of monthly financial obligations compared to the borrower’s income.
What sources of income are eligible?
Sources of income can include wages, child support, pensions, veterans’ benefits, Social Security, alimony, and even bonus payments and overtime pay can be considered as qualifying income if it can be demonstrated that the payments have been steady.
Do I need a high credit score?
FHA loans are lenient when it comes to credit scores, or at the very least are a lot more flexible than conventional loans. With that being said, FHA loans do require a minimum credit score of 620; if the score is less than 620 and above 600, an FHA loan might still be available, but the minimum down payment requirement may be higher.
What if there’s a previous bankruptcy or foreclosure?
If a borrower has had a previous foreclosure and/or bankruptcy on their credit history, FHA Insured loans can still be available, but only after a specific period has elapsed (2 years for bankruptcy and 3 years for a foreclosure) and the borrower’s credit has been re-established by way of no late payments within the past 12-24 months of applying for an FHA loan.
In summary, buying a home when you have very little money saved and a less-than-stellar credit score might seem like a long shot, but it’s not. In most cases, a level of commitment and steadiness in your personal finances combined with a Federal Housing Administration loan can help make your dream of owning a home a reality.
Whether you’re a first-time or a repeat homebuyer, or you need to refinance, or just have questions, I’d be happy to help. Give me a call or send me an email today and I’ll respond to any and all inquiries, even if you’re not buying or selling a home in Durant, OK.