What is a FHA Loan?
FHA mortgage loans are issued by federally qualified lenders and insured by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development.
FHA loans are an attractive option, especially for first-time homeowners:
- Generally easier to qualify for than conventional loans.
- Lower down payment requirements.
- Cannot exceed statutory loan limits.
FHA Loan Application Process
The loan application process will require you to deliver docuemnts to your lender. A lender cannot accurately process your application without having all the requested docuemnts in hand. For many home buyers and homeowners this can be a stressful process. Lending requirements have drastically changed over the last few years so please make sure you communication with your lender and deliver the requested documents promptly.
Most applications take 24-48 to review and a decision can be issued. Incomplete applications, missing information or inaccuracies will delay the process. Leaving gaps in the application data or guessing information could cause serious delays in the processing of an FHA loan application. If you have any questions or issues with the requested documents, please make sure to make your lender aware right away!
If you have major issues on your credit profile such as bankruptcies, foreclosures, judgments, liens, collections, employment gaps or lack of employment, please disclose these up front so that the lender can accurately assess your scenario from the start.
FHA Down Payment Requirements
FHA home loans are widely used for the reduced down payment option! While conventional loans require you to have 20% equity in the house (20% down payment on a purchase), FHA loans only require you to put 3.5% down on a purchase and go up as high as 97.75% Loan to Value on a rate and term refinance.
Most people know FHA mortgages for their low down payment requirements. The minimum requirement is 3.5% on a purchase. There is no way to take away the mortgage insurance by putting 20% down payment. FHA charges mortgage insurance even with substantial down payments and even with reduced terms such as the 15 year fixed.
The down payment can be derived from numerous sources however. It can come from the buyers checking/savings, it can be gifted by a family member, it can be borrowered from a 401k or other investment vehicles, and lastly it can come from a secondary financing source such as Down Payment Assistance Programs. We currently have a
Contact me today to find out if you qualify for any type of assistance to reduce your down payment!
Sacramento FHA Lender Requirements
So what does it take to get an FHA loan these days? There are many factors that go into this process. FHA sets some hard guidelines but much is left for underwriter interpretation. Depending on the lender and the underwriter, a person might get denied at one lender and approved at another with the exact same scenario. What it comes down to is that different lenders will take more risk while others will not.
To give an example, some lenders will approve only 640 credit scores while others will look at credit scores down to 580. Another common differnece is how much a lender is willing to lend. This ties in to the debt to income ratios. The rule of thumb is that for the most part all lenders go up to 45% debt ratio with some making this figure their cap. However, there are lenders that will approve ratios as high as 56%.
Since there are countless variables that could impact your scenario, it is best that you contact a mortgage professional to discuss your scenario in detail.
If you are considering purchasing a property in California, make sure you are fully pre-approved before looking at any properties. Realtors require buyers to have been pre-approved and no offers can be submitted without a written pre-approval from a lender.
FHA Streamline Loans
If you obtained an FHA home loan either through a purchase of a house or refinances, you might be eligible for an FHA streamline refinance. There are several benefits to doing a streamline refinance including lower interest rates and no appraisal. Having equity in your house is not a requirement which allows many homeowners to take advantage of reducing their interest rates and payments! Contact us today to find out if you could take advantage of doing a streamline refinance on your existing home mortgage!