If you have been considering putting your money into your own home and building equity instead of filling your landlord's pockets, you should know that there is a way to afford a home of your own. The federal government's Housing and Urban Development agency has a loan program that is custom-made for people who didn't think that they could qualify for a home loan. The Federal Housing Administration's loan program makes it possible for you to fulfill your dream of owning a home. Here are 10 facts you need to know about FHA home loans.
- Less than perfect credit is okay. A minimum credit score of 580 is required to qualify for the 3.5% down payment. With 10% down payment your score can be as low as 500.
- The loan will be assumable. This means that when you get ready to sell your home, someone can simply "assume" the FHA loan, which is a very attractive quality for buyers.
- Bankruptcy is not necessarily a problem, but you must show that you know how to use credit more wisely (with a credit report that shows smart use of available credit) and you should be at least two years from your initial bankruptcy filing.
- Foreclosures are allowed, as long as it's been at least three years since the foreclosure and you can show that you can manage credit better now.
- You can get loan amounts of up to $625,500 depending on where you live. Your loan limit will based on the area of the country, your debt-to-income ratio and your use of credit.
- Loans come from banks and lenders, not from the government. You will apply to banks that work with the FHA, who guarantees the loan to the lender.
- Insurance is a requirement. Extra mortgage insurance is required due to the low down payment amounts. The amount is 1.75% of your loan, and it can be paid up front or rolled into your mortgage payment.
- Two years of steady employment with the same employer is required for all loan applicants (for example: husband and wife); or at least two years steady employment in the same field.
- Your debts must be in line with the guidelines. Your total monthly debts, including the new mortgage and insurance must be less than 43% of your gross monthly income.
- Property must pass an appraisal from an FHA approved appraiser.
These 10 facts show that home ownership is attainable even for people who may have made financial mistakes in the past. Make it a goal to take the first step toward home ownership and use your credit wisely. To learn more about home loans, visit Dynamic Mortgage Concepts Inc.