You Ask,”How Do I Qualify For An FHA Mortgage?”
The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved mortgage lenders. FHA insures mortgage loans for nearly every type of property including single family homes, condos, Town homes, Villas, Modular, manufactured and multi-family homes. Since 1934 FHA has been the largest insurer of residential mortgages in the world.
What Are FHA Mortgage Lenders Looking For?
The FHA mortgage lenders decide the standards they ultimately apply in making loans.
When deciding whether to make am FHA mortgage loan, FHA approved lenders evaluate the four Cs:
- Cash- FHA Mortgage Lenders consider your readily available money and savings plus investments, properties, and other assets that you could sell quickly for cash. Having these reserves proves that you can manage your current obligations and have funds, in addition to your income, to pay the mortgage.
- Credit. Lenders check your credit score and history to assess your record of paying bills and other debts on time. (Even if you don’t plan to buy a home now, it’s always a good idea to build and maintain strong credit. Landlords often check it to make sure that you can pay the rent. It’s also important if you want to apply for a mortgage or other credit line in the future, such as a student loan, car loan, or credit card.)
- Capacity to pay back the loan. Lenders look at your income, employment history, savings, and monthly debt payments, such as credit card charges and other financial obligations, to make sure that you have the means to take on a mortgage comfortably.
- Collateral. Lenders take into account the value of the property and other possessions that you’re pledging as security against the loan.
- FHA Debt To Income Ratios- In order to prevent FHA mortgage applicants from getting into a home they cannot afford, FHA guidelines have been set in place requiring borrowers and/or their spouse to qualify according to set debt to income ratios.
- FHA Credit Issues- FHA mortgage approvals are not based on a credit score driven model but rather a common sense approach to mortgage lending. An FHA mortgage applicant’s past payment history IE credit performance that demonstrates good credit history and a solid track record of timely payments will likely be eligible for the mortgage.
- FHA Mortgage Insurance- FHA mortgage loans require mortgage insurance to protect FHA mortgage lenders against losses that result from borrowers defaults on FHA mortgage loans.
- FHA Mortgage Lenders Loan Limits-FHA mortgage loan limits vary based on a variety of housing types and the state and county in which the property is located.
- FHA Mortgage Document Loan Checklist- Before you start the loan process, you’ll want to be prepared for the loan application. Have your information organized and ready for your loan officer. Be prepared to pay for property appraisal and a credit report.
- FHA Mortgage Closing Costs- While FHA defines which closing costs are allowable as charges to the borrower, the specific costs and amounts that are deemed reasonable and customary are determined by each local FHA office.