FHA Loan?
An FHA insured mortgage loan is guaranteed by the United States Federal Housing Administration. This provides mortgage insurance, and the loan will always originate from a lender that has been approved by the Federal Housing Administration, which protects the borrower.
FHA loans are set up in order to make it easier for families or individuals with less income to be able to buy homes, when they might not be able to do so under any other circumstances. This program opens up a lot of opportunities, and it is definitely something that should be considered by anybody who is in a lower income bracket and still wants to find a way to buy a home. The Federal Housing Administration loan program started in the 1930s during the Great Depression. The goal of the program was to try to protect lenders and borrowers while still minimizing the number of defaults and foreclosures.
There are, however, some requirements that must be met in order to be eligible for an FHA loan. There is a premium of 1.75 percent that has to be paid to the FHA up front, and this is often rolled into the loan amount and paid by the lender. There is a monthly premium, as well. As a result, this is a more expensive loan.
"Loans are what we do, not who we are."- CEO, Steve Jacobson
Why we
love FHA Loans
*Some restrictions apply
Minimum Down Payment
3.5% down. Funds can come from various sources.
Seller Contribution
Seller can contribute 6% as long as buyer has 3.5% down payment.
Maximum loan amount*
In DFW the maximum allowed is $531,300
Minimum Credit Score
With 3.5% down payment the typical minimum is 580, but FHA will allow 500 with 10% down payment.
Debt-to-Income Ratio*
FHA allows 2 ways to approve a mortgage: Automation or Manual Underwrite. With good credit, automation will allow DTI to be as high as 55%
Grant/Bond program*
Allowed! It is important to note that grant or bond programs are income, credit and debt to income restricted
Gift Funds*
Yes! 100%
Guidelines*
More flexible/forgiving on credit issues
Co-signer
(Non-occupying)*
There is restricted list of who can be a non-occupying cosigner
Non-Occupying Co-signer*
Allowed! Chapter 7 is allowed two years after discharge provided that good, reestablished credit history has occurred. If a foreclosure was involved in the bankruptcy, then it is three years from the foreclosure instead of the two years from the Chapter 7 discharge
Federal IRS
Tax Lien*
Yes- FHA allows a federal IRS tax lien to continue to be paid and not paid off and still close on the mortgage
to know
While an FHA loan makes a lot of sense for those who are in a position where they do not have better options, the total interest and fees will be higher than conventional loans. As a result, if a borrower does have other options for the loan, usually the FHA loan will not be the best option.
There are also a number of requirements that are laid out by the Federal Housing Administration on loan limits, housing types and debt ratios. The goal is to try to avoid people who are not only in a lower income bracket, but also pose an exceptionally high risk of default.
As a result, it is important to prepare for the process to make sure that you meet all of the requirements. We have a team of experts at The Heritage Group, who handle a variety of cases. Many of them specialize on FHA loans and can sit down with you and walk you through the guidelines in order to determine whether or not you might qualify.
If you do, they can help you submit the information and begin the process.
this loan
is right for you?
Take a look at our loan comparison page here to find out more about other loan types and get a better feel for which one fits your needs best!
This may vary depending upon the specific type of mortgage you are applying for, as different agencies will need to be involved in the process. Typically the process plays out in a month or less, though some will go quicker. It is not uncommon to have the mortgage application processed within 10 days. It is critical that you get the application entirely completed, so that you can avoid any delays along the way.
The main thing that can delay the approval of a loan is failing to properly and completely fill out the applications. It is also important that you be completely honest on the applications, as any discrepancies may cause delays. In addition, changing jobs, having a change in your salary, changing your marital status or taking on additional debt can delay the approval of a loan.
Closing costs include items such as taxes, title fees and hazard insurance. Sometimes what is included in closing costs varies, and it can be impacted by the negotiation process on the sale price of the home, as the homeowners may or may not cover certain closing costs. You’ll want to have some money set aside to cover your closing costs.
Prepaids are items that you as the homebuyer pay at closing. This is a payment before the actual due date. These may be necessary depending upon the details of the closing. They include taxes, hazard insurance and other various assessments.
After you close, you’ll receive a letter that includes all of the dates and information that you need. If you want further details while you are closing, you should inquire about the specific due date of the first payment.
“Loans are what we do, not who we are.”
– CEO, Steve Jacobson