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Today, the FHA loan program has become the primary option for refinancing and purchasing a new home. As a First Time Homebuyer with FHA home financing, you can buy a new home with as little as 3.5% down. Loan officers and lenders call this 96.5% home financing, and that is significant more aggressive than most non-FHA loans that require 20-30% down-payments. Gone are the days of 100% financing with the 80-20 loans. The FHA also allows the 3.5% down-payment to be in the form of a gift. The FHA continues to promote homeownership. FHA still allows couples to set-up a “bridal registry” where family relatives and friends can contribute to the down-payment of a house.
FHA loan qualifications begin with an FHA mortgage lender who will evaluate your debt to income ratio which is simply dividing your monthly expenses by your monthly income. With traditional mortgages, (ie. conforming home loans), lenders will typically allow a 28% of your gross monthly income on housing costs such as mortgage interest, principal, property taxes and home insurance. Conventional mortgage guidelines will usually enable you to shave a debt to income ratio of 36%.
With FHA home loans guidelines, the typical ratios are 46/57, but FHA underwriters have the authority to approve borrowers with higher debt ratios if they have significant compensating factors. This is a major benefit first time homebuyers can find with FHA home loans because the guidelines are more flexible allowing applicants to get better and more aggressive financing than with conforming or mortgage loans!
Contact us today to begin your FHA Loan process!
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