FHA Loan
In case if you are looking for a no money down or 100 percent mortgage financing, you have several options. Understandably, many homebuyers have little cash on hand for a down payment. As a matter of fact because of the increase in home prices, saving the typical 20% is practically impossible. Fortunately, it is worthwhile remembering that FHA home loan programs offer 100 percent mortgage financing, which eliminates the need for a large down payment. Below mentioned tips can play a pivotal part in helping you qualify for a FHA home mortgage loan.
Employment Guideline for Getting a FHA Mortgage Loan
There is no hiding the fact that FHA loan are very flexible. Still, always remember that before approving a homebuyer for a FHA loan, the lender will carefully review several factors to determine whether they are an ideal candidate for a mortgage loan.
It is worth mentioning in this regard to acquire a FHA loan lenders require steady employment. In an ideal scenario this involves two years of continuously working. There is no denying that it helps to maintain the same employer throughout the two years.
If experts are to be believed individuals who change employers every four to six months or those who only held employment for half of the 24 months may have a hard time getting approved for a FHA loan. On the other side of the coin if unemployment was due to layoffs, illness, or other legitimate excuses, the lender may consider the applicant for approval.
Credit Guidelines for FHA Loans
Point to be noted in this regard is that when reviewing a homebuyer's application for a mortgage loan, the lender will look at all credit activity that has occurred within the last two to three years. As a matter of fact concerning late payments, applicants cannot have more than two 30 days late payments within a two-year period.
In addition bankruptcies must have a discharged date of at least two years. Furthermore, it is worthwhile remembering that foreclosures must be at least three years old. In both cases, it is worth pointing that mortgage lenders require that homebuyers have begun re-establishing credit and building a good credit history.
Income Guidelines for FHA Loans
In an ideal scenario to qualify for a FHA mortgage loan, lenders will evaluate combine household incomes and other consumer debts (auto loan, credit cards, student loans, etc) to ensure that the mortgage payment does not exceed 30% of income. However, fact of the matter is FHA loan lenders are flexible in this regards. In other word because of rising home prices and modest incomes, lenders may approve loans that exceed 30% of the homebuyer's income.
According to experts, conventional loan means loans under the current lending limits set by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Fannie Mae and Freddie Mac, respectively. On the other side of the coin a Federal Housing Administration (FHA) loan is a loan based on an insurance program that enables you to buy a home with a down payment of as low as 3%. Point to be noted in this regard is that FHA is administered by Housing and Urban Development (HUD). In simple terms it is one of two government loan programs available to borrowers. As a matter of fact the other is a Veterans Administration (VA) loan, available only to veterans of the military service.
Theoretically speaking the FHA loan program, similar to conventional loan programs, allows for mortgage refinancing of owner occupied properties as fixed mortgage rate loans and adjustable rate mortgages (ARMs). As is pretty much the case with conventional refinances, FHA refinances can be used for such purposes as:
* First and foremost Home Improvements and Renovations.
* Secondly Debt Consolidation, including consolidating a home equity loan (second mortgage), if 2nd loan is less than 1 year old.
* In addition Large Purchases.
* Furthermore it can have a significant say in Schooling.
* Vacation.
* Last but not the least Investment(s), including second home or vacation home purchase.
If experts are to be believed according to the FHA, 1-2 unit primary residences may cash-out up to 95% of the estimated property value. On the other hand for other property type the maximum cash-out is 85%. Theoretically speaking this is at least 5% more than on a conventional refinance loan. And what*s more you do not have to have an existing FHA loan in order to get FHA refinancing.
While there is no denying that FHA loans are funded by financial institutions such as mortgage centers or banks like conventional loans, it does not actually lend money but
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rather guarantees a loan in case of borrower default. As a result, there is no hiding the fact that there is less financial risk to the lender, allowing them to offer lower rates to borrowers than rates offered by conventional refinancing. And, above all it is worthwhile remembering that FHA has the most forgiving credit criteria*FICO scores of 580 (east coast), 560 (Midwest) and 520 (west coast) being considered acceptable.
In addition as is pretty much the case with the conventional loans, FHA mortgages require mortgage insurance. It is worth mentioning in this regard that conventional loan mortgage insurance is cancelable under most circumstances once you build at least 20% equity in your home. According to experts the FHA states that, in most cases, FHA insurance will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property, whichever is longer.
Believe it or not you can now refinance your FHA loan with their streamlined process. As a matter of fact with reduced paperwork, your lender can process your mortgage much quicker and with an utmost ease. Theoretically speaking there are some unique requirements to refinance your FHA loan, but fact remained that you continued to be backed by the FHA through this process.
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