FHA Housing Loans
Owning a house is a dream cherished by almost every single person and as an American, this is probably most true. But most people don’t have the full amount to buy a house for themselves. Also if the person thinks about borrowing the money required for a home, the rates of interest are very high. In addition most people find that they are not eligible for a home loan. The federal housing administration (which is a part of HUD) enables people to get loans at very reasonable rates. The applicant needs only to be approved by FHA – and once approved, they can borrow money at much lower rates under terms which are not so strict.
What Are the Advantages?
- There is more flexibility. Borrowers who have poor credit scores will also be able to get mortgage loans at reasonable rates. The initial down payment will be different for people with different credit scores.
- There are numerous types of loans. Loans can also help the buyer make repairs on the new house.
- Low down payments. The borrower pays low down payments in comparison to other loan types.
- Eligibility for certain reliefs: if any misfortune were to befall the borrower, there are provisions for relief.
The Qualification Criteria:
Even though qualifying is much easier when compared with other loan types, there are certain things that will be considered.
- The lender will want to make sure that the borrower does not have any previous record of defaulting loans.
- A stable job: the borrowers must have a stable and secured job for being eligible for a loan.
- the down payments are decided based on the borrower’s credit scores. For example a borrower with 580 credit score or above will be eligible for a down payment of 3.5%. Borrowers with 500 to 579 credit scores will be eligible for 10% of the down payment.
- The debt to income ratio of the borrower is also very important. The debt that a person owes should not be more that 43% of the monthly income.
- The house will need to be approved by the appraiser. And the appraiser will be approved by the FHA.
- The person must want to buy the house for residing in it. Loans will not be provided to those who want to make an investment.
There is additional criteria that needs to be met by the borrowers. Only if they meet all these criteria, will they be approved by the FHA.
All the documents must be perfect so that all standards are met. All the tax returns for the past two years must be submitted. There are various documents that need to be submitted. Some of them are credit card reports, bank statements, etc.
The lender will also perform a number of checks to make sure that all the requirements are met. After all the quality checks, the documents are verified by an underwriter and the final decision is made.
Chances for Delays:
There are large number of people and agencies involved in the process of lending money and because of this, there is a huge chance that the process may be delayed. If there is any small mistake in the process of drawing the contract or if the borrower is not able to submit any one of the required documents, then there is a high chance that the borrowers application will be rejected.