What is a FHA Loan?In 1934, the Federal Housing Administration (FHA) was established to improve housing standards and to provide an adequate home financing system with mortgage insurance. Now families that may have otherwise been excluded from the housing market could finally buy their dream home.FHA does not make home loans, it insures a loan should a homebuyer default and the lender is paid from the insurance fund.Buy a house with as little as 3.5% down.Ideal for the first-time homebuyers unable to make larger down payments.The right mortgage solution for those who may not qualify for a conventional loan.Down payment assistance programs can be added to a FHA Loan for additional down payment and/or closing cost savings.FHA Loans vs. Conventional Home LoansThe main difference between a FHA Loan and a Conventional Home Loan is that not only does it require a lower down payment, but also the credit qualifying criteria for a borrower is not as strict. This allows those without a credit history, or with minor credit problems to buy a home. FHA requires a reasonable explanation of any derogatory items, but will use common sense credit underwriting. Some borrowers with extenuating circumstances surrounding bankruptcy discharged 1-year ago can work around past credit problems. However, conventional financing relies heavily upon credit scoring, a rating given by a credit bureau such as Experian, Trans-Union or Equifax. If your score is below the minimum standard, you may not qualify.If I've Had a Bankruptcy in Recent Years, Can I Get a FHA Loan?Yes, generally a bankruptcy won’t preclude a borrower from obtaining a FHA Loan. Ideally, a borrower should have re-established their credit with a minimum of two credit accounts such as a car loan, or credit card. Then wait ONE YEAR since the discharge of a Chapter 7 bankruptcy, or have a minimum of one year of repayment for a Chapter 13 (the borrower must seek permission of the courts). Also, the borrower should not have anymore credit issues like late payments, collections, or credit charge-offs since the bankruptcy. Special exceptions can be made if a borrower has suffered through extenuating circumstances like surviving serious medical conditions, and had to declare bankruptcy because high medical bills couldn't be paid.What Documents are Needed to Apply for a FHA Loan?Your loan approval depends 100% on the documentation that you provide at the time of application. You will need to give accurate information on:EmploymentComplete Income Tax Returns for past 2-yearsW-2 & 1099 Statements for past 2-yearsPay-Check Stubs for past 2-monthsSelf-Employed Income Tax Returns and YTD Profit & Loss Statements for past 3-years for self-employed borrowersSavingsComplete bank statements for all accounts for past 3-monthsRecent account statements for retirement, 401k, Mutual Funds, Money Market, Stocks, etc.CreditRecent bills & statements indicating account numbers and minimum paymentsLandlord's name, address, telephone number, or 12- months cancelled rent checksRecent utility bills to supplement thin creditBankruptcy & Discharge Papers if applicable12-months cancelled checks written by someone you co-signed for to get a mortgage, car, or credit card, this indicates that you are not the one making the payments.PersonalDrivers LicenseSocial Security CardAny Divorce, Palimony or Alimony or Child Support papersGreen Card or Work Permit if applicableAny homeownership papersRefinancing or Own Rental PropertyNote & Deed from any Current LoanProperty Tax BillHazard Homeowners Insurance PolicyA Payment Coupon for Current MortgageRental Agreements for a Multi-Unit PropertyHow big of a FHA Loan Can I afford?Your monthly costs should not exceed 29% of your gross monthly income for a FHA Loan. Total housing costs often lumped together is referred to as PITI.P = PrincipalI = InterestT = TaxesI = InsuranceExamples:Monthly Income x .29 = Maximum PITI$3,000 x .29 = $870 Maximum PITI>Your total monthly costs, or debt to income (DTI) adding PITI and long-term debt like car loans or credit cards, should not exceed 41% of your gross monthly income.Monthly Income x .41 = Maximum Total Monthly Costs$3,000 x .41 = $1230$1,230 total - $870 PITI = $360 Allowed for Monthly Long Term Debt>FHA Loan ratios are more lenient than a typical conventional loan. PITI expenses can’t exceed 26% to 28% of your gross monthly income, and total expenses should not exceed 43% to 47%.
FHA ELIGIBILITY RULE CHANGE ON BORROWERS WITH PRIOR BANKRUPTCY AND/OR FORECLOSURE !Borrowers with a prior bankruptcy, foreclosure, deed-in-lieu, or short sale may be eligible for an FHA insured loan if the bankruptcy, foreclosure, deed-in-lieu, short sale was the result of a documented extenuating circumstance. Borrowers may also be eligible for an FHA insured loan on a purchase transaction after 12 months from the completion, discharge, trustee's sale if the borrower meets the requirements for extenuating circumstances. With our current minimum FICO score requirements of 580, an our ability to manually underwrite FHA loans, these FHA enhancements allow us to fulfill one of FHA’s major goals. To help borrowers who previously had great credit histories but were recently affected by the rescission and lost their previous home or filed bankruptcy. I would like to propose that you contact all of your past clients and share the new FHA updates with them. “Our country remains strong and our government is willing to help our industry grow. We all need to playour part in assuring that all families are able to own and live with respect in their own home”.
1. Borrowers with a prior bankruptcy, foreclosure, deed-in-lieu, or short sale may be eligible for an FHA insured loan if the bankruptcy, foreclosure, deed-in-lieu, short sale was the result of a documented extenuating circumstance. 2. Borrowers may also be eligible for an FHA insured loan on a purchase transaction after 12 months from the completion, discharge, trustee's sale if the borrower meets the requirements for extenuating circumstances
New FHA Loan Guideline Updates •580+ FICO Score to 96.5 LTV purchase and 97.75 rate & term or 85 LTV cash out•Minimum 580 FICO on flips or high balance•No DTI restrictions, follow AUS•Collections only need to be paid if required by AUS•No minimum credit history or trade lines with AUS approval•Borrowers with 1 credit score OK•No VOR unless required by DU findings•Non-occupant co-signers no minimum FICO•Mortgage Rates OK if US approved•1 day off of market for cash out Refi. Property to be off market before date of loan application•Borrower with work permits/non-resident aliens OK•Rental Income on 2-4 unit properties OK for 1st time homebuyersWith our ability to manually underwrite FHA loans, these FHA enhancements allow us to fulfill one of FHA’s major goals and help borrowers who previously had great credit histories but were recently affected by the rescission and lost their previous home or filed bankruptcy. 1st Florida Lending is Your FHA Loan Expert! We Can Answer Your Questions and Give You the Best Information to Get You Started. We offer Low Rates + Flexible Terms and make Qualifications Easy with an FHA Loan. Click Here to get pre-qualified for your FHA Loan today!