8 Things You Need To Know To Qualify For A FHA Loan In Texas
With the help of FHA loans, you can now fulfill your dream of owning a house with a low payment or limited credit. Here is what you need to know about qualifying for an FHA loan and things you can expect.
The FHA loan program allows you to buy a home with just 3.5% of the property value as a down payment even when you have a credit score that is lower than as required by traditional mortgage providers.
It is also important to understand that the FHA loan program is not limited to low-income applicants or first-time homebuyers. Here is what you need to know about FHA loan qualifications.
1. Verifiable Income
One of the biggest factors that affect your qualification for an FHA loan is your ability to repay the loan. Here is a rough criterion you need to meet in terms of income:
The mortgage payment should be below 35% of your income before taxes and all your monthly debt payments including your mortgage, credit cards, car loan, or any other loan should be within 48% of your income.
If all these things sound confusing, feel free to use our home affordability calculator to figure out the maximum amount you can afford to spend on a home. If your dream property costs more than what you can afford now, you should try to pay off as much debt as possible before applying for an FHA loan.
2. Down Payment – 3.5%
The minimum down payment you need to make for an FHA loan stands at 3.5%. However, it is close to 6% of the purchase price of the home in reality as you also need to pay the closing costs. This closing cost also includes the upfront mortgage insurance premium which is equivalent to 1.75% of your home’s value. You can bring this insurance premium down to 1.25% when you undergo an FHA approved credit counseling program before you close the deal.
3. Credit History
Established credit history is a must and you need to have at least 2 lines of credit such as a credit card and a student loan in order to qualify for an FHA loan.
4. FICO Score Range 580 to 640
The minimum FICO score you need for qualifying for an FHA loan program is 580. However, you should know that FHA is not the lender but it acts as an insurer and the minimum credit score requirements are set by the lender. This minimum score is often around 640 when it comes to FHA loans. Keep in mind that conventional mortgages usually require a FICO score of around 700.
You can check your credit score for free if you don’t already know it. If your score is above 640, is completely safe to apply for an FHA loan. If your credit score is below this limit, get in touch with the chosen mortgage lender and inquire about their minimum scores to process FHA loan applications. Keep in mind that you should do all this before making an official application.
5. Remain Within FHA Loan Limits
You cannot borrow as much as you want with an FHA loan as there are federally set limits that depend on your state and county. However, in most cases, the limits aren’t low enough to prevent you from buying a home that is expensive.