FHA loans refer to mortgage loans that are usually backed by the government to help individuals who cannot afford to put down payments that are required to secure a home mortgage loan. In short, it helps poor homeowners realize their dreams of owning a home. Owning a home is not an easy task. It requires you to have the funds to put towards the home project.
Without the funds, it is almost impossible to realize the dreams of owning a home. As much as the government wants to help more homeowners get access to the home loans, you need to have met several requirements that have been set. So the first thing you need to do is to know what are the requirements to apply for an FHA loan. The main benefit of the FHA loan is that you can easily get the home loan, but in return, the government expects you to pay a mortgage insurance premium.
This premium usually stays active during the life of the loan, and especially for those individuals who put a down payment of less than 10%. For you to get an FHA loan, you need to know which requirements need to be met. Failure to do so only leads to frustrations, especially when you apply, and you have not met several requirements. Read on to learn how to get an FHA loan.
You need to know the requirements that have been set if you want to qualify for the FHA loan in Houston Texas. Having a basic knowledge of what credit score is needed for an FHA loan is important when applying for this loan. You don’t need to have a very high credit score. You can still qualify for the loan with a lower credit score, as long as you provide a larger down payment.
The FHA lender will have to review your past credit performance to check whether you have been repaying your previous loans on time. However, most lenders will give you an FHA loan if you have met a minimum mortgage credit score of 580. When the lender reviews your history, they will take note of any past credit issues. If, for example, you have recent late payments, foreclosure, or bankruptcy, you may not qualify for the FHA loan.
To qualify for the loan, you need to ensure that your past credit report is up to per. Spend some time to build a good credit report before you apply for the FHA loan in Texas.
Income And Job History
The lender will also check your income to determine whether you qualify for the loan. Now you have to know what is the income limit for an FHA loan and see for yourself if you qualify for it. As much as the government aims to help more people access FHA loans, you still need to have a source of income to enable you to repay the FHA loan. For you to get the loan, you need to have two years of stable employment.
If you don’t have a source of income, there is no point in applying for the mortgage loan because you won’t get approval. The FHA also has a 57% debt to income ratio requirement. Based on your income and debts, the lender will check whether you have met the set DTI threshold. By calculating your DTI, the lender can determine whether you will manage to repay the loan or not.
If you are not employed but you operate a business, you need to prove that the business can provide a steady income. Note that if your income statements for the business show a considerable decline in revenue over the last two years, you may not qualify for the FHA loan.
If you want to get an FHA loan, you need to put your financial documents in order. The lender will require that you provide at least bank statements for the last few months. In case you have large non-payroll deposits, you will need to explain the source and even verify where the money came from. Since you will need to pay a down payment and closing costs, you need to ensure that your checking account or savings account is in a good state. This is why many borrowers will ensure they save up in advance to ensure they have the money needed for the down payment, in their account.
The other thing to note is that you will not qualify for the loan if you don’t plan to use it as your primary residence. If you have other intentions, such as living in the home part-time, you will not qualify for the loan. If you are also looking to refinance your investment property or buy a second home, understand that you are not eligible for an FHA loan. However, you should consider a conventional loan. You should also have 18 years or more for you to qualify for the loan.
If you have been wondering how one gets the FHA loan, you don’t need to worry anymore. Just go through the requirements listed above and check whether you meet the requirements. Once you determine that you have met all the requirements, you can easily apply. The next thing you will think about is how long does it take to get an FHA loan. After you made the application, you still need to wait for the approval of your loan. Making sure you have met all those requirements will give you more chances to get your loan approved quickly.