You are ready to buy your first home, but you keep hearing about FHA and wonder if its a right fit for you. As a first time home buyer, it is a right fit for you!! Why? Because of the FHA loan requirements are designed to make it easier for you to qualify for a loan.
Here's an example of some of the basic requirements:
Two years of regular employment, they would like to see if with the same employer
Don't have more than two 30 day late payments on your credit report
You can have a lower credit score than most require
Been two years since discharged from a bankruptcy and your credit is now good
Your house payment will be less than 28% of your total monthly income
You have 3.5% saved for your down payment
Let me clarify, FHA is not actually the lender. They are the ones that insure the loan, so there is mortgage insurance associated with this loan. This is a good thing for you. Since they will insure the loan, this encourages lenders to approve loans for those whose credit would not normally qualify them for a loan.
Here's the deal, if you're a first time home buyer who:
Doesn't have much money for a down payment
Need as low a monthly payment as you can get
Credit is not so perfect
Concerned whether you can even qualify for a loan
If you meet the basic FHA loan requirements mentioned above, then you need to look into an FHA insured loan. Let me explain further on those basic requirements.
Employment
You must have two years of regular and I mean regular employment. It can be with different employers, but your changing employment should be to improve your situation. Which would mean an increase in your income. But if you changed employment too often, you won't appear dependable. Why should this make a difference? Well you want the lender to view you as dependable, so your employment history should show that you're dependable.
30 Day Late Payments
You don't want more than two 30 day late payments on your credit history. What does that mean? A 30 day late payment is a payment you paid 30 days after the due date. You don't want more than two of those listed in your credit history. You mean they keep track of how late I am on paying my bills? Yes!!! Your payment history is recorded on your credit report. But they only record those payments that are 30 days late. So don't be late in paying your bills.
Credit Score
This is a score that the credit reporting agencies give you to measure your credit worthiness. Lenders use that score to see what kind of risk you will be. FHA loan requirements will allow a lower score than most. Currently that score is 620.
Bankruptcy
If you have declared bankruptcy, don't worry. FHA loan requirements will allow for this as long as you have been discharged from the bankruptcy two years. This is a nice perk for those who have been in bankruptcy.
28% of Your Total Monthly Income
What this means is that your house payment cannot be higher than 28% of your income. Let's say your total monthly income is $2000. Then your house payment can't be more than $560 a month. FHA wants to be sure you will be able to afford this house you want to buy. This payment would include your principle, interest, taxes, and insurance (PITI).
Down Payment
Most every lender requires you to put some money down on the home. FHA loan requirements are lower for that required down payment. They are also flexible with this requirement. Perhaps you have someone who is going to give you the down payment. FHA will allow this gift for the down payment as long as it is a family member or charity. Other lenders are not as flexible and want to see that its your own money.
Now you can see why all the buzz about FHA. They have the best set-up for first time home buyers. If you fit into these basic requirements, then you need to find a lender who works with FHA and you're on your way to buying that first home.
Why waste time and money? Mr. Ragan has 24 years helping people reach their goals. Construction, buying foreclosures, real estate investing, first time home buyers finding a mortgage and looking for credit assistance. Avoid costly mistakes and visit his website with hundreds of pages and free reports.
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