The Federal Housing Administration has been extremely helpful to a lot of people who’ve had challenges in obtaining conventional mortgages due to stern requirements. That said, compared to conventional loans, the FHA can be considered generous in terms of what it demands from its borrowers. One may ask, however, what FHA requirement or standard is most important among everything?
A direct answer to that question is that every requirement is just as vital as everything else. An applicant’s credit score is one of the most integral things the FHA considers. Borrowers can be eligible for an FHA grant with a down payment as low as 3.5% for those whose credit score is 580 or better. Borrowers whose credit scores are anywhere in the 500 to 579 level will still qualify but will need to pay a 10% down payment. It’s also vital to note that the lower a debtor’s credit score is, the higher his or her interest rate will be.
Other FHA Requirements
Under an FHA mortgage, debtors should have been employed for at least two years under the same employer since the date of application.
It’s also essential for applicants to have a legitimate Social Security number, be of legal age, and be a lawful resident of America.
Primary FHA-approved Home
Homes that borrowers push for must also be their primary residential home. Interestingly, it is imperative that these properties reach a specific set of standards determined by an HUD-affiliate appraiser. In the event that the house you’d like to purchase does reach minimum requirements and a seller does not oblige in agreeing to the necessary overhauls, the option you’re left with is to fund the needed repairs yourself during closing. The money used for repairs will be kept in escrow until the overhauls are considered finished.
Re-established Credit After Bankruptcy and Foreclosure
Moving forward, debtors who’ve gone through a bankruptcy must have re-established better credit and should have been free from bankruptcy for more than two years since the date of application. Should there have been extenuating situations beyond the borrower’s control, only one year is needed. Similarly, borrowers who’ve gone through a foreclosure must have re-established better credit and should have been free from foreclosure for three years since the date of application.
FHA’s Required Paperwork
The following are documents that FHA collects:
- Names and location of your employers (past two years)
- Gross monthly salary at your current job(s)
- Pertinent information for all checking and savings accounts
- Pertinent information for all open loans
- Complete information for other real estates you own
- Approximate value of all personal property
- Certificate of Eligibility and DD-214 (for veterans only)
- Current check stubs and your W-2 forms (past two years)
- Personal tax returns (past two years), current income statement and business balance sheet for self-employed individuals
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Make use of Gift Funds
Aside from the incredibly low down payments the FHA can permit, it’s pleasing to note that the FHA also gives the green light in making use of gift funds for 100% of a down payment.
Additionally, these loans are assumable, too. Should you have plans of selling the home before the loan ends, an arrangement can be made.