FHA : What is it and what does it take to purchase?
So…you are tired of renting and looking at the idea of purchasing a home. What’s that mean?
Well, you have plenty of options available to you. One option (perfect for first time homebuyers) is looking into an FHA financed mortgage. Why? Well, here you go :
FHA FUNDAMENTALS :
- Downpayment of 3.5% of sales price
- Minimum credit score of 580 (500-579 require a 10% downpayment)
- Mortgage insurance premiums rest at 0.85% as of 01/15.
- Debt to income ratio of 31%(front end) and 43% (back end) ratio. Meaning…31% towards housing cost and 43% toward housing cost and living expenses.
Easy, right? Well, FHA does have a stringent appraisal process as well. This means they look for several items to make sure the homebuyer is in a position to live in a home comfortably and not in a money pit.
FHA APPRAISAL :
Certain redflag items include the following :
- Loose handrails
- Peeling paint
- Assurance that the lot is graded away from the home to prevent moisture issues
- Heating system must create a comfortable living situation in each room
- Roof in good state of repair
- Foundation in good state of repair
To quote : HUD Handbook 4150.2, the home “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants.”
FHA CREDIT SCORE FACTS :
- Lenders set their own minimum credit score (“overlay”) requirements with FHA. So, if one lender won’t approve you with a score of 585, call around to other mortgage lenders in the area.
- When a lender pulls three credit scores, the one in the middle is the one that sticks. When only two scores are pulled, the lower number is the number that is taken.