Question by Jeremy M: How do FHA mortgages work and what are the minimum qualifications?
Best answer:
Answer by Yo
FHAs are not credit driven and they mostly focus on income. You can only get a house for a certain price depending on the region where you are.
What do you think? Answer below!
A site at http://www.mortgageawareness.com has free consumer information on home loans for first time home buyers.
FHA Mortgages “were” designed for people that originally could not be approved for a conventional mortgage.
FHA Minimum qualifications …
3% Down Payment Required – This does not have to come from your funds. This can be a gift. Also, you should check into down payment grant programs. I use the buyersfund.com. (seller participation is required), but it alleviates the need for the 3%.
Debt-to-income ratios – 29/41 This means that total mortgage payment must be equal to or less than 29% of your gross income. And your total mortgage payment plus all minimum payments required (on your credit report) must be equal to or less than 41%. Now, these types of loan go through an automated underwriting system. If the system approves you with higher ratios, then fine. But these are the guidelines.
Credit Scores/Credit – FHA does not require a minimum credit score. Lenders do. For example, even though FHA did not specify a credit score, we imposed a minimum 550. Later to get to a more true FHA guideline, this was lowered to 500. If you don’t have credit and no score, alternative credit can be used to build a credit history (ie 12 months of telephone bills, car insurance, cell phone bills etc)
There are no income restrictions with FHA – You could make as much as you want.
There are loan amount restrictions and it is based on the county you live in. Go to https://entp.hud.gov/idapp/html/hicostlook.cfm this is FHA’s website and you can look up your county, state etc to see what the max loan can be.
Property restrictions – No real property restrictions unless you are buying a manufactured home which will require certain details (ie >400sf, on its own land, permanently attached to foundation etc)
Visit my blog http://mortgagecounselor.blogspot.com for other information or contact me and I can answer more specific questions. (all informational, no solicitation) I like to help that’s all.