Rhode Islanders in need of a low down payment program, FHA is the way to go.
FHA (Federal Housing Authority) mortgage loans were created in an attempt to increase homeownership. Unlike conventional mortgages, the FHA mortgage loan is backed by the government.
The FHA mortgage loan is usually easier to qualify for and has become hugely popular with tighten mortgage restrictions for first-time buyers and step-up borrowers.
Highlights of the FHA mortgage loan program include the following:
Minimal down payment requirements:
The FHA mortgage loan program allows most borrowers to purchase a home with as little as 3.5% of the sales price. The funds for the down payment may be a gift from a family member,a grant or the borrower’s own funds.
No minimum credit score requirements and easier qualifying guidelines:
Although FHA does not have a minimum credit score requirement, most lenders will require borrowers to have a minimum fico score of 620.
If a borrower has had a bankruptcy or foreclosure, they can still qualify. If a bankruptcy occured, 2 years must have passed after discharge and 3 years for a foreclosure.
Closing costs and pre-paids may be paid by seller or from a gift:
The seller may contribute up to 6% of the sales price towards closing costs, pre-paids and other mortgage expenses for the borrower.
A gift is also allowed for the closing costs.
In addition, there are no reserves required on a FHA home loan mortgage.
Relaxed Employment history:
The lender will view your employment history to verify your current position and your ability to repay your loan. FHA prefers individuals with two or more years at current position and/or in the same field. However, the borrower may have less than 2 year’s job experience to qualify for an FHA mortgage loan. For example, if you are recent student and just started at a job, your education may be counted towards your work experience providing you are employed in the same field as your degree. Proof of transcripts and dipolma may be required.
How much can I qualify for?:
FHA requires your mortgage cost to be less than 29% of your gross monthly income. This amount includes PITI (principal, interest, tax, and insurance). For example:
your monthly income is multiplied by .29, which equals your maximum PITI. If your monthly income is $2,500.00, your maximum allowed PITI equals $725.00.
FHA also has higher debt ratios than most other programs, FHA suggests that your mortgage and combined debt do not exceed 41% of your income. Debt is to include but not limited to: mortgage expense, car notes, credit cards, other lines of credit, Child Support, Alimony, loans, etc.
The good news is that you do not have to be a first-time home buyer to qualify for the many FHA mortgage loan programs available. Whether you are purchasing a 1-4 family property, a property that needs cosmetic work less than $35,000 (203k streamline) or extensive renovation work, (203k) FHA is the way to go. There are many deals to be had in the Rhode Island real estate market.
To learn more about the FHA mortgage loan, call me today. I would be happy to help.
Lynda Mckenzie
Mortgage Consultant
Mortgage Master Inc.
NMLS#137627/RI license#137627
Direct: 401-524-9796
E-mail: lmckenzie@mortgagemasterinc.com
Rhode Island Mortgage
RI Loan Broker 95000655LBBo1 / RI Lender License 2005 1876LLB01
