FHA Loan Qualifications: Do You Qualify For A Loan?
Those interested in obtaining an FHA loan will need to meet some guidelines prior to obtaining one. Those who don’t have the money to make a down payment often struggle to get a mortgage-based loan, but an FHA loan have less guidelines and restrictions. In fact, they are the most popular federal loans because of their more lax criteria. The loan will actually be handled by a private lending agency, while the Federal Housing Authority backs up the loan. To help the lender decide whether to approve the loan, various criteria will be evaluated, such as credit, employment and income, and debt ratios. Credit Those with a lot of debt, three or more late payments, accounts handed over to collection agencies, lack of credit, and such may not qualify. For example, if you have been the victim of foreclosure, you must wait at least three years before applying. You must not have any other credit black marks between that time and when you apply. If you were forced to apply for bankruptcy and obtained bankrupt status, you must wait two years under the same conditions. Steady Employment and Income The underlying basis of a loan is that you will be able to pay back the money borrowed over a period of time. If you aren’t making enough money to repay the loan, there’s no reason for you to be approved for one. Acceptable sources of income are gift funds, mad money, earnest money deposits, checking accounts, and savings accounts. Not only do you have to have enough income, it must come from a steady source. If you were just hired a month ago at a new job, your income is not considered steady. Generally you must have worked at your job for at least 24 months before it is counted as consistent. Debt Ratios Debt ratios, set by HUD, have to do with how much money you make versus how much you spend. You may make $100,000/yr., but if you have $90,000 in expenses, you’ll have problems being able to repay a loan. The allowable ratio is currently 31/43. The 31 represents the ratio between your income and your housing expenses should the loan be approved. FHA will not want to loan you more than 31% of your total monthly income. Let’s say you make $1,550 each month. Making a monthly payment of more than $500 per month will not be approved. The 43 represents the ratio between your income and your expenses. If you spend more than 43% of what you bring in, this will also be frowned upon. To speak to a representative, you can visit their website at www.fha.com. You may also contact them though HUD’s website at http://www.hud.gov.
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