Can you qualify for an FHA loan?

FHA loan programs have become popular again as a reliable option for home buyers since the revival of the mortgage industry the past few years. It is a loan program that offers easier qualification and the least amount of down payment. So what do you need to know about it? Here are a few key guidelines:

Down Payment
Minimum 3.5% of the sales price is required from buyer's fund or gift from family member.

Seller Concession
Seller can pay up to 6% of the sales price for closing cost. This does not have to include owner title policy, survey, and home warranty.

Minimum Credit Score
To qualify with 3.5% down payment, your minimum mid credit score has to be 580 or higher. If buyer has 10% down, then the credit score to qualify will be even lower. (We can qualify most buyers down to 580 with 3.5% down payment versus many major banks who cannot due to their own requirements.)

Assets
Most buyers do not need large amounts of assets showing in their bank or retirement fund. Just enough for the down payment will be sufficient.

Appraisal
All properties must pass HUD standards, but that doesn't mean the house has to be perfect. The major items to look for are roof, structure, and foundation. Minor safety hazard items may have to be addressed too, but often are very workable.

Previous Foreclosure or Bankruptcy on Record
ANY previous foreclosure or bankruptcy history on your credit record has to pass at least 3 years from foreclosure date or 2 years from bankruptcy discharged date for consideration.

Purchasing a HUD Foreclosure Home
HUD foreclosure homes are simple and easy to finance with an FHA loan. HUD already has an appraisal for the buyer and, if any repairs are needed, HUD will allow escrow repairs. Not many lenders will work with it, but we do.

Time to Close
Buyers with good solid credit history and income can close their loan as fast as 3 weeks (1 week for option period and 1 week for appraisal and 1 week for underwriting).

Mortgage Case Study: Home Buyer with 580 Credit Score

We closed a FHA loan with a home buyer that has a mid fico score of 580, which is below the current standard now of 640. The process does require more planning for the loan officer and buyers.

Here are the things we evaluated: (The best plan for a real estate professional is to work with a loan officer to evaluate the buyers ability to purchase a home, or just contact us.)

Credit - Their credit of course is less than ideal, but one major factor not listed on the credit report is their rental history. They had an excellent rental history and no collection or charged offs from any apartments they ever lived.

Assets - I recommended them to have (on top of their down payment) at least 2 months PITI (principle, interest, taxes and insurance) saved in any of their retirement, 401K, checking, or savings account.

Bank Statements - Bank statements took time to plan and execute. I reviewed their most recent 2 months statements and it is obvious they are spending more than what they made. Underwriters will view that as failure for the home buyers to budget their finances, and therefore cannot afford to purchase a house. I sat down with the buyers and worked out a budget for them to follow. After 2 months following the budget, they closed on their loan and were very happy.

I sincerely believe home ownership is for everyone. It does take planning, working the plan, and willingness to change your life style to fit a mortgage into the budget.

SUCCESS STORY: Home Buyer with Low Credit Score Buys $284,000 House

A JENNYLOANS.COM SUCCESS STORY
Home Buyer with Weak Credit but Strong Rental History Buys House

One of our clients closed a mortgage loan today, even though his credit score of 619 is 21 points below most lenders' standards. This client is a perfect example of how planning, strategizing, and taking action helped him reached his goal of buying a new home. The process started 3 months ago when I evaluated his income, assets, and credit. They were living in a rental house with $1,400 rent and $400 utility bill. Even with a low credit score, we found several positive traits (lenders would call it "compensating factors"):

-Low debt-to-income ratio

-12 months verifiable rental history through cancelled checks

-401K available for down payment

-Good employment history

With all this considered, he purchased a house for $284,000 and is moving in today! Is your credit good enough to purchase a house? Not every situation is the same, but contact me and we can evaluate your options.