FHA Loans Make Home Buying Easy
Since the housing crash of 2008, home buyers have faced severe difficulties obtaining conventional mortgage financing. While rates remain at historic lows, lenders often require home buyers have up to 20 percent down and meet stringent credit standards. That has, to a large extent, eliminated many potential home buyers from the market. However, there are other programs available making it possible for buyers with as little as 3.5 percent of the purchase price to move into the home they dream of. Today’s home buyers may find it beneficial to discuss with lenders how FHA Home Loans can help them purchase a home now, rather than having to save a substantial down payment.
What Types of Homes Qualify for FHA Financing?
While FHA has requirements in place, it’s not always clear if a particular home will meet those requirements. When questions arise because of potential issues like the location or condition of the home, buyers are encouraged to ask about the possibility of FHA financing rather than assuming a property won’t qualify. Standards have changed over the years, and Texas properties that may not have qualified for financing in the past may be eligible today. There are even programs available for manufactured housing.
Are Loans Available for Rehabbing or Updating Homes?
There are several FHA home loans available to cover many needs. While the 203b Home Mortgage Loan, typically used to purchase a property, is the most common one, other loans to repair properties after disasters, update older properties to be more energy-efficient, or simply remodel are offered, such as an FHA 203k Home Loan. Another option many older homeowners are not aware of is an FHA’s HECM program, also known as a Reverse Mortgage.
How Do Buyers Qualify for a 203b Home Mortgage Loan?
Houston FHA loans share four major requirements. However, it’s important to note not every lender is the same, and there will be variances in specific requirements from one lender to the next.
– Buyers must meet FHA credit requirements. The FHA itself requires a minimum credit score of 580, but many banks will enforce a somewhat higher minimum score. Some large lenders want to see a minimum score of between 620 and 640. However, some Texas lenders are making loans available with somewhat lower credit scores.
– Borrowers must document their income. Tax returns, 1099s, and other forms will be needed depending on the type of income a borrower has. Although revenue added to the base salary may count, that income must be consistent. In other words, a one-time bonus probably won’t count, but a consistent overtime pay may. The lender for FHA home loans in Texas will discuss what items can be included as income for loan qualification.
– Home buyers must have at least 3.5 percent of the purchase price as a down payment. The higher the loan-to-value ratio, the more the interest rate will be, so discuss this issue carefully with the loan officer. If buyers can put more money down, it will benefit them over the term of the loan.
– Borrowers must have a “reserve”. In other words, home buyers must prove they have sufficient assets to cover payments and expenses set aside in case of an emergency after they exhausted the down payment for a house. The amount here varies from lender to lender, so clarify the requirement with the loan officer. The typical rule is to have three months worth of reserves.
Although FHA Home Loans require more paperwork than conventional loans, they make buying a home possible for people who don’t have huge down payments or stellar credit ratings. Discussing the potential for FHA loans with a lender before even starting to shop makes it possible for buyers to pick out properties they can buy today and move into quickly.
For more information about an FHA home loan, contact our Home Loan Specialists at 281-949-7218.