Phoenix home buyers looking to take advantage of favorable interest rates, reduced home prices, and a low down payment should consider an FHA loan when buying a new home in which to live. The Federal Housing Administration (FHA) is a part of the U.S. Department of Housing and Urban Development (HUD). Since FHA loans are insured by the government, it’s easier for a lender to offer you the option of a lower down payment. FHA home loans allow first time home buyers and current home owners to purchase a home with a 3.5% down payment. In order to qualify for a FHA loan, you will need to ask yourself the following questions.
• Do I have two years of steady employment, preferably with the same employer? In most cases, school may be considered part of your employment history.
• Can I document my last two years’ income with tax returns, W-2′s, or 1099′s?
• Does my credit report have less than two thirty day late payments in last two years? Also, do I have a credit score?
• If you had a Chapter 7 Bankruptcy, has it been discharged for at least two years and has good credit been re-established?
• If you have had a foreclosure or short sale, has it been finalized for at least three years and has good credit been re-established?
• Will my new mortgage payment not exceed 45% of my gross income and debts combined.
If you have answered “yes” to all of the above qualifications, than you are probably a good candidate for an FHA home loan. Below is a helpful list detailing some important FHA Guidelines and steps to getting prequalified.
Documents Needed - Please click here for a list of items we will need in order to submit your loan.
Income - When you are qualifying for a loan, we will use your gross income. That means all the money you earn before taxes, including overtime, commissions, dividends and any other sources –as long as you can show a steady two year history for these sources. You can calculate your monthly housing payment by clicking here.
Credit - If you are unaware of your credit score, you can contact us today to pull your credit history. Most lenders require FHA borrowers to have at least a 620 or better mid-FICO score in order to be approved. FHA will also allow some minor past credit issues, as long as the borrower can provide a “reasonable” letter of explanation for the situation. If you have a Federal Tax Lien, which currently has a repayment agreement, you do not have to pay it off in full provided you are able to qualify with the monthly payment stated within the repayment agreement. State Tax Liens typically must be paid in full prior to closing your FHA loan.
Bank Accounts - FHA will allow for a homebuyer to receive the down payment for the purchase of a home as a “Gift” (meaning you do not have to pay it back), from a close family relative or a non-profit organization. When receiving a “Gift”, you must provide the complete paper trail of the funds being gifted to you. Such as the donors bank statements, withdrawal slips and deposit information.
These are not all of the requirements, but a good starting point. We highly recommend getting prequalified for an FHA mortgage through a qualified mortgage professional.