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Qualifying For An FHA Loan

The FHA loan is, without question, one of the easiest full documentation mortgage programs to qualify for. With flexible underwriting guidelines that use both Automated and Manual Underwriting processes, the FHA Loan program affords more Home Buyers the opportunity to become homeowners than any mortgage program available today. To find out if you can qualify for an FHA Refinance or purchase loan, simply give us a call today or use our fast and easy Quick Mortgage Application to learn more!

The qualifying guidelines for the FHA loan program, for the most part, are very non-specific and general. This is intentional! HUD wants to allow approved lenders the flexibility to make exceptions for borrowers based upon individual circumstances and compensating factors. This offers everyone an equal opportunity to be approved for an FHA loan. Why not call today to learn if you qualify for an FHA loan!

Through the years, we've worked with many prospective borrowers from Alabama to North Carolina and one thing remains constant; for those that meet the general qualifications, many borrowers that don't close using the FHA program are the ones that won't do what is necessary to own a home using a low Fixed Rate FHA mortgage. Really! We've seen it in applicants from Tennessee to prospective homeowners in Missouri. We can get them approved, but that approval requires they take action to address past wrongs and make them right. Many elected to use a high risk Bad Credit Loan and many of those are now paying the price.

So what can you expect when you apply for an FHA loan with any HUD approved lender? For qualified borrowers, you can expect an approval for a loan amount that makes sense to your income. You're not going to get "Fancy Financing" deals with FHA. Whether you're looking to finance a Mobile Home with land or a traditional stick built home, what you will get is an approval for a FHA loan that you can afford based upon your earnings today! This protects you from the unknowns of tomorrow and protects the program against unnecessary defaults.

What's our secret to getting so many approved for an FHA loan? The secret to getting approved for an FHA loan is simply answering the question "Does It Make Sense?" We put together packages that tell a story about you, that can make lending money to you make sense to the Underwriter. Our goal is to put your best foot forward. If what you want doesn't make sense, and doesn't meet guidelines, we can't help you.

Learn more use our Quick Mortgage Application to get the process started.

In general, underwriters for the FHA loan program make decisions with the following considerations in mind;

  • Qualified borrowers should have at least two years of steady employment, ideally with the same employer.  College or continued education, is used in lieu of work history.
  • If you have defaulted on a government insured student loan, be prepared to pay this loan off or have made prior payment arrangement in which you are now paying consistently on time.
  • Federal and State tax liens must be paid in full; or you must have made prior payment arrangements in place with at least a 12 month history of repayment.
  • Existing Judgments must be paid in full. Again, in some instances, if you have established payment arrangements and have at least a 12 month history of repayment, you may still be approved.
  • Past due child support payments must be brought current.
  • Your prior two years of income should be consistent or show an increase. 
  • Your credit report should show credit quality and stability over the last 12 months.  Be prepared to explain prior credit difficulties that may exist over the course of the last five years.  For those who choose not to use credit, we will build an alternative file utilizing rent, utilities and other forms of monthly repayment lines (cellular phone, home phone, etc).
  • Any prior Bankruptcy must be at least 24 months since Discharge, with good credit reflecting since the date of discharge. Alternative credit can be used for those who elected not to re-establish traditional credit after the bankruptcy.  In some instances, we can use manual underwriting for exceptions when a borrower has extenuating circumstances, or adequate compensating factors, that led up to a bankruptcy.
    • Example; A serious medical condition with no health insurance required extensive and expensive treatment. This is an extenuating circumstance leading to a bankruptcy in which an underwriter MAY make exceptions.  
  • Past Foreclosure should not have occurred within the past three years. Applicants should show good credit since the prior foreclosure occurred.
    • At no time can you have defaulted on a government insured home loan, to include the VA loan program.  There is no time limit on defaults on government insured loans; records go back decades, so if your default was in 1970, it will be found. If you have defaulted on a government insured home loan, please save everyone a lot time and don't apply for one. 
  • Your proposed new mortgage payment should meet qualifying payment ratios based upon your present income. You may utilize the 2/1 Buy-Down option to facilitate payment qualifying, however, the FHA loan guidelines do not allow for specialty financing options like Interest Only payments. Be prepared to qualify for what you can afford today.
  • If you are an FHA Home Buyer, you must have at least 3% of the purchase price for your down payment. HUD has 100's of approved down payment assistance grant programs, and we'll be more than happy to assist you in finding one that you might qualify for.
  • Closing cost for an FHA loan are no different than that of a conventional loan. You'll need to have up to 6% for closing costs. With very few exceptions, HUD allows the home seller to pay all of your closing costs. This requires an underwriters approval, however, rarely is this option disallowed.
  • Your last 12 months (1-year) of rental payments - mortgage payments for refinance clients - must have been on time. In some instances, we can make exceptions for a single late provided you have enough compensating factors to explain the situation.

These are only some of the most fundamental guidelines used to pre-qualifiy a homeowner or home buyer under the FHA loan program.  If you can meet these most basic of underwriting criteria, chances are you can get pre-approved for an FHA loan regardless of the state you live in. To learn more give us a call or just use our Quick Mortgage Application

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