What are FHA Loans?

FHA stands Federal Housing Administration, is a mortgage loan program designed to purchase a property such as single-family residences, condominiums, townhomes, or manufactured homes. This type of loan is backed by the government. What are the requirements?

What is the minimum credit score for an FHA loan?

The minimum credit score is 580. When your credit score is under 620 more documentation or compensating factors may be required. Some of those requirements are mortgage reserves, residual income, lower debt to income ratio, verification of on time rental history.

How much money should I save?

In short, you should try to have your down payment, closing costs and mortgage reserves. The minimum down payment is 3.5% on an FHA loan, the closing costs will range between to 2% to 3.5% of the purchase price. (Example: On $300,000, the minimum down payment is $10,500, and the closing costs are about $7,000 to $9,000). The closing costs will vary depending on the title and escrow company you choose, the type of inspections needed in the home, how much you will pay on discount points and if you can negotiate seller contribution towards your closing costs.

For mortgage reserves, ideally you should have 2 months equal to your mortgage account in the bank.

What documents do I need to apply for an FHA loan?

If you are employed by a company and don’t have ownership of the company, you will need to present all your W2s for the most recent 2 years, most recent 30 days of paystubs, most recent 2 months of bank statements and government ID.

If you are self-employed, you will need to present the above list of documents and your most recent two years of tax returns – personal and business.

When applicable you will also need to provide a copy of your living trust, gift information if you are getting a gift for the down payment, copy of mortgage statements, taxes, and proof of insurance for any other properties owned, copy of retirement or stocks account if you plan to use those assets towards your down payment and divorcee decree or child support documentation when applicable.

The bank will want to verify you have 2 years of work history, explain any gaps of employment longer than 6 months, and make sure your immigration status fits the FHA guidelines.

What could disqualify me from getting an FHA loan?

If your credit score is under 580. If your debt-to-income ratio is too high, max debt to income ratio is 56.99%. In community property state we must run your spouses credit report and add any additional debt to the borrower’s main application even if the borrower is not on the loan. If you don’t occupy the property as your primary residence.

How do I get started?

Apply today, loan applications and consultations are completely free with us, and you can find out if you qualify today or if there is something that needs to be worked on. We will look for the best loan program, see if you qualify for down payment assistance or pair you up with an agent that can negotiate closing costs paid by the seller on your behalf. Most importantly we will make sure you are comfortable with the monthly payment.