There’s a reason why mortgage debt in this country has reached a staggering $16.6 trillion. Millions of people rely on mortgages to afford the homes that they live in. Unfortunately, not everyone can afford the expensive nature of mortgages.
If you’ve been denied traditional loans, then you should try to qualify for a FHA loan. In this article, we’ll be learning more about what FHA loans are and who qualifies for them. Let’s get started!
Things Needed to Qualify For an FHA Loan
FHA Loans are provided by the Federal Housing Administration. These types of loans are intended for low-income individuals who need lower down payments and lower credit score limits to apply for their loans. Particularly if you are in the process of trying to get a better credit score but need to secure an alternative to the conventional mortgage.
Check out this guide if you want to know more about FHA loans here. There’s no way to know in advance whether or not a lender will accept your FHA loan application. However, there are a set of requirements that every applicant must qualify for to take advantage of the loan.
1. Social Security Number
Your vendor will need to confirm your identity before they can begin with the application. To do this, they will need access to a valid social security number.
2. Verifiable Income
Your vendor will also want to make sure that you can afford the cost of things like a down payment, closing costs, and monthly payments. As such, they’ll want to verify your income using pay stubs or your tax return.
3. A Credit Score of 500 or More
Assuming you want the minimum down payment of 3.5%, then you will need a credit score of 580 or higher. However, if you’re able to provide a 10% down payment, then you can qualify with a score as low as 500.
4. Minimum 3.5% Down Payment
As we mentioned, you will need to put down a down payment of at least 3.5% if you want to qualify. If you have a low credit score, then this amount will need to be higher.
5. Mortgage Insurance Premium
You will also require mortgage insurance that’s worth at least 1.75% of the loan amount at the time of closing. Additionally, between 0.45% to 1.05% will be charged annually and added to your month-to-month payments.
6. Debt-to-Income Ratio That’s Lower Than 43%
Your DTI refers to the percentage of your income that goes toward your debt. Most people can keep their mortgage payments to under 36% of their monthly incomes. However, anything higher than 43% isn’t likely to qualify.
Want More Content? Keep Reading
We hope this article helped you learn whether or not you qualify for a FHA loan. As you can see, there are still a lot of hoops you need to pass through to get an FHA loan.
However, the qualifications are much more lenient than traditional loans. As such, you should give it a shot if you meet all of the requirements. Did you enjoy this article? If the answer is yes, then you’re in the right place. Keep exploring to find more content that you’re sure to love.
