Fairway Mortgage is Top 3 in FHA Loans
16 Mar

FHA Loans And Guidelines

FHA Loans And Guidelines

What Is An FHA Loan?

An FHA Loan is a loan that is from the Federal Housing Administration or FHA which reports up to HUD or the U.S. Department of Housing and Urban Development.  FHA Loans are issued by private lenders but insured by the FHA against default.  FHA Loans are some of the most popular loans available for all buyers whether they be first-time home buyers or experienced buyers.  The reasons that these loans are the most popular is the fact they have some of the most lenient guidelines of all loan programs out there.  The common misconception amongst borrowers is that FHA Loans are only for those who have derogatory credit and can’t get approved elsewhere but this is definitely not the case.  Just so you, the borrower, can see what we are talking about, we will go over some of the main guidelines and how they can apply to you and ensuring you can get approved for a loan.  Working with Nick Ferrante NMLS #1110570 at Mortgage Scenarios through Fairway Independent Mortgage Corporation NMLS# 2289 he can walk you through the step by step process to get you on your way to home ownership.  He is available 24-7 at 630-465-2656, email:nick.ferrante@fairwaymc.com , or www.mortgagescenarios.com.

FHA Loans: Credit Score And Down Payment

FHA Loans give a lot of different borrowers the ability to purchase a property and you start your home buying journey, it is key to know your FICO credit score because that will determine the set of guidelines you will have to follow in order to obtain an approval.

  • FICO Credit Score 580+ = 3.5% Down Payment
  • FICO Credit Score 500-579 = 10% Down Payment + Compensating Factors

You can see here that per FHA Guidelines which can be found in the FHA 4000.1 Handbook that you can obtain an FHA Loan with a 3.5% down payment as long as you have a 580 FICO credit score.  If you aren’t fortunate enough to have a 580 FICO but fall in the 500-579 range we can work with you on a case-by-case basis in an effort to get you approved with additional compensating factors.  For example if you want a $200,000 mortgage with a 600 FICO credit score you will only need a 3.5% down payment or $7,000.  In comparison if you have sub-580 FICO score you would be looking at having at least $20,000 down payment.

FHA Loans: Debt To Income Ratio

In addition to FICO credit score, FHA Loans are also very forgiving when it comes to your debt-to-income ratio or DTI.  This is calculated by taking your monthly debts: proposed mortgage payment, auto loans, credit card minimums and divides it by your monthly gross income or pre-tax income.

  • FICO Score 620+ = 56.9% DTI ratio
  • FICO Score Below 620 = 43% DTI ratio

As an example if you have a 640 FICO score and you make $5,000 gross income per month, you are able to have 56.9% of this or  $2,845 in monthly debt to abide by guidelines for FHA Loans.

FHA Loans: Derogatory Credit Items

Just because you might have run into some credit troubles in your past, FHA Loans allow you to return to home ownership if you have let a sufficient time pass and have taken strides in improving your credit.  The following mandatory waiting periods for specific events are below.

  • Chapter 7 Bankruptcy = 2 years after discharge date
  • Chapter 13 Bankruptcy = No waiting period after discharge date.  If you are still in repayment phase and have been current for at least 12 months you can get a loan with bankruptcy trustee approval.
  • Short Sale = 3 years after completion or Settlement date on the HUD-1
  • Foreclosure = 3 years after sheriff’s sale or the date from when the deed to the previous home was taken out of your name.

Let Nick Help You

Nick Ferrante NMLS #1110570 at Mortgage Scenarios wants to make sure he helps all our potential borrowers understand the steps involved in their quest for home ownership.  Don’t bother calling into a call-center when you can contact him directly at 630-465-2656 or   nick.ferrante@fairwaymc.com .  Nick looks forward to working with you to make home ownership a reality.

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