Mandatory FHA Home Loan Qualifications
If you are contemplating purchasing a home, you can consider going for FHA home Loan financing option. This could save you some good amount of cash as long as you meet FHA loan qualifications. Most people who opt for this option are first time home owners due to the low down payment needed and less strict credit requirements compared to their conventional counterparts. However, there are some qualifications that must be met for one to get the FHA Home loan… which are: -
- One must live in the property to be purchased, thus discouraging investors from buying property using this mode of financing
- The second FHA loan Qualification is a solid employment history preferably with the same employer for a period not less than one year. If you are self employed, you must show proof of being in the same line of work for the same period of time. A graduate on the other hand can use a recognized diploma in place of employment history.
- The third requirement is the ability to raise a down payment of 3.5% for someone with a credit score of above 580, failure to which one will need to place a 10% down payment. An exception to the 3.5% down payment is 100% down payment incentive program.
- Still on point, for self-employed applicants, they have to show income tax returns of 2 years including an exhaustive profit and loss income statement from the business if it is already incorporated. Note that the debt-to-income ratio shouldn’t be over 41%. In case you have other debts like student loans, you can be allowed to have a debt-to-income ratio of 45%.
The FHA home financing loans are gaining lots of popularity today more than ever before because of the 3.5% down payment – the lowest down payment requirement in the industry today. Their conventional counterparts require a down payment of 20%. Sellers have in the previous times been able to pay a closing cost of 65 for buyers but it is projected to change to 3% in the coming years. As such, you should confirm with your FHA approved lender for current updates they might have on closing costs.
A very important point to note, even though home inspection isn’t a mandatory requirement for FHA loan qualification, it is highly recommended to get one. Why? Because the Federal Government has some standards that properties must meet, which are different from home inspection. In case the property doesn’t meet the set standards, property sellers must meet the costs of maintenance or improvements required before closing in on a deal, or have the estimated costs locked up in an escrow account. In case the seller is not willing to meet the maintenance costs, chances are quite high that the property will not be financed by the FHA home loan.
Most FHA loan qualifications are quite lenient compared to conventional loans and because it is easy to qualify and get an FHA home loan, coupled with the low down payment, it could be the surest and fairest way that people can purchase their dream home.
