When you are looking for a bank that will get you a mortgage, wouldn’t you do everything in your power in order to keep those costs down? In doing so, you want to limit the interest rates, and especially lessen the size of the closing costs and down payments. How can you do this? The USgovernment has given homeowners the way, which is called the FHA loan. Now, the same with all government programs, there are requirements, but these are rather manageable to meet. For instance, most FHA loan requirements are rather common sense and are a great way to motivate practices that homeowners should already be doing.
What Can an FHA Loan Do For You?
One of the nicest parts about the FHA loan is the fact that it can slash your down payment, and even bring your interest payment to a couple percentage points off the current rates. Overall, the FHA loan was developed for the express purpose of making home ownership more affordable.
An FHA loan is basically no more than an insurance policy on your existing mortgage. The reason why the costs go down is because the banks risk goes down with it, because the government backs up your promise to pay back what you owe on the house. This means that if you are somehow not able to pay your mortgage, then the federal government can step in and bail out that loan.
How To Qualify:
FHA loan requirements are rather easy to understand. One of the most interesting things about FHA loan requirements is the fact that credit score isn’t a deciding factor. This has the capability of opening the financial doors on a mortgage, when they once thought it wasn’t a possibility.
The very first thing to keep in mind about an FHA loan is the fact that it must not exceed 30% of your yearly income. For instance, if you are buying a $200,000 house, but you are only making $50,000 on a yearly salary, then you did not meet the FHA loan requirements. But, if you had the same value house, but make $67,000 per year, then you would just barely squeak by.
In addition to that, you should have worked the same job (or line of work) for at least two years, in order to show consistency. The government wants to make sure that you are capable of paying down a mortgage by holding down a steadily paying job.
Also, you should keep in mind that in order to qualify for the FHA loan requirements, the house in question couldn’t exceed more than $250,000. With a quarter-million dollar home, hopefully the new homeowners do not need federal assistance.
There are quite a few other requirements on the FHA loan, but the important thing is to use common sense. Don’t attempt to take out a mortgage on a house that you cannot afford, and you will almost automatically qualify for a government-backed FHA loan.