Commonly knowns as a first-time homebuyer’s loan, the Federal Housing Administration (FHA) loans are used to help individuals with low or moderate income to obtain a mortgage. But what does this mean and what are the requirements for FHA loans? Read on to find out some of your FHA questions.
What is an FHA Loan and Are There Limits?
An FHA loan is a mortgage that is issued by federally qualified lenders and is insured by the Federal Housing Administration. These loans are designed for low to moderate income borrowers who are unable to make a large down payment traditional loans demand. FHA loans allow borrowers to borrow up to 97 percent of the value of the home. But this doesn’t mean you have to pay the remaining 3 percent out of pocket. The remaining percentage can come from a gift or grant, making this loan popular with buyers just starting out. There are limits to how much you can borrow as well as the area that you are looking in.
How Do I Qualify for an FHA Loan?
Before you start applying for an FHA loan, you will need to gather some information. You will need:
- Your address for the past two years
- Your social security number
- Names and location of your employers for the past two years
- Gross monthly salary at your current job
- Pertinent information for all checking and savings accounts
- Complete information for other estates you own
- Approximately value of all your personal property
- Certificate of Eligibility and DD-214 (for veterans only)
- Current check stubs and your W-2 forms for the past two years
- Personal tax returns for the past two years
- Current income statement and business balance sheet if you are self-employed
Now that you have all of your information together, you are probably wondering about the credit score requirements. When you apply for this loan, you will need to pay for a credit report and a property appraisal once you have found a property. But let’s go over the credit score requirements.
How Good Does My Credit Need to Be?
Before approving a loan, your FHA lender will need to analyze your past credit performance. If you have a good credit score with a solid track record of timely payments, you will likely be eligible for an FHA loan. But this doesn’t mean that if you have bad credit or even no credit that you will be denied a home loan. To be eligible for an FHA loan, you must have a minimum credit score of at least 500. Anything below 620 is considered subprime. Borrowers with lower credit scores may not be able to qualify for the loans based on activities like not paying their bills on time.
These are just some of things you should know about FHA loans. For more information on buying your first home, call Simply Referable today!
FHA Loans with Simply Referable
There are any number of obscure and strange real estate laws in Maryland. The small team of realtors at Simply Referable will be happy to help guide you through the thicket. Each of our team members has an area of expertise, and we strive to form lasting bonds with each of our clients. We want to be your go-to realtors every time you or a friend wants to make a change. With local experience, our realtors can help you choose a house that is just the right fit for your family, now and forever. Contact us online or give us a call at 410-983-9045.