FHA – First Time Buyer Mortgage
Qualifications
Qualifying for an FHA loan is easier than qualifying for most other mortgages. There are four main requirements:
- Be employed for a minimum of two years
- Be able to make a down payment of 3.5% (may be a gift from a relative)
- Have a 580 credit score
- Have no federal liens or defaults on federal loans (such as student loans)
Applicants with less than perfect credit will not be automatically turned away. As long as credit issues can be explained and that explanation is reasonable, the FHA will still consider the loan. Those who have filed for bankruptcy are eligible for an FHA loan after two years unless they have an extenuating circumstance that led to a loss of income of 20% or more. Late payments from the past will be overlooked if the applicant can show that they have recently kept current on their bills.
Unlike many lenders, the FHA does not have a strict debt-to-income ratio. Many traditional lenders turn down first-time buyers because they have a large amount of debt—credit cards, student loans, and car loans often add up to more than a lender will allow. The FHA actually allows applicants to have as much as a 55 percent ratio. As long as the applicant believes they can make the mortgage payment, the FHA is willing to overload significant debt. This is especially true if the applicant can show that either their income will be increasing soon or that they will be paying off a loan or credit card in the near future.
Upfront Costs
One reason many first-time homebuyers seek out an FHA loan is because these loans have low upfront costs. The down payment is only 3.5%, which is much less than normal—many lenders and programs require as much as 20 percent. Closing costs are kept low, and the seller is allowed to pay as much as six percent of these costs
*The down payment associated with this offer is from the borrower’s funds (the borrower’s funds must be sourced and can include gift funds or funds from approved Down Payment Assistance program). The down payment cannot be from the lender credit or a seller credit. Restrictions apply, consult your Personal Mortgage Advisor for details.
All home lending products are subject to credit and property approval. Rates, program terms and conditions are subject to change without notice. Corporate NMLS Unique Identifier # 32416. Verify a mortgage company or individual license on the Nationwide Mortgage Licensing System Consumer Access site: www.nmlsconsumeraccess.org. The interest on the portion of the credit extension that is greater than the fair market value of the dwelling is not tax deductible for Federal income tax purposes: and the consumer should consult a tax advisor for further information regarding the deductibility of interest and charges. U.S. Dept. of Housing & Urban Development Mortgagee-FHA Lender ID # 23773-0000-0, 23773-00017 (Unconditional Direct Endorsement Approved), USDA SFHGLP Approved, Department of Veterans Affairs VA Automatic Lender 56997-00-00. Nations Lending Corporation®
