If you are a first time home buyer, the time has never been better to explore financing. With subprime loans gone in the market, many first time buyers are left with questions about what is the best option for them. While FHA/VA mortgages haven't been as popular in recent years because of the perceived amount of bureaucracy associated with obtaining a loan guaranteed by a government entity such as the HUD, new legislation is in the works to help make them more consumer-friendly.
First time home buyers represent a large share of the lending market and they receive a lot of attention. Many do not have established credit histories or a lot of money to put down for a down payment (because they are usually fresh out of college or still early in their careers). Currently, there are some mortgages that require no down payment to obtain financing and have different loan limits in each county. Apply now to obtain more information about the limits and down payment requirements in the Houston, TX area. We are your answer for your home mortgage.
Credit score - One of the primary market benefits of a FHA/VA loan has always been that credit scores were not a factor. A borrower with great credit scores could definitely have their loan approved more easily, but someone with some credit problems could still get approved - provided they had a well documented common sense explanation for their credit problems and could show that the problem had been resolved. In spite of not relying on credit scores, FHA/VA foreclosure rates went down while conventional mortgage foreclosure numbers went up in spite of their almost excessive reliance on credit scores. The FHA/VA underwriter will evaluate the entire credit profile to determine the borrower’s likelihood of repayment. Past credit issues may be overlooked if new credit has been re-established. Also, other compensating factors may apply. Generally a credit score of 580 is needed for automated approval and a few banks will underwrite a file with scores as low as 540.
Bankruptcy okay – Chapter 7 bankruptcies are allowed if discharged over 2 years ago (or 1 year with extenuating circumstances). Chapter 13 bankruptcies are allowed with a minimum of 1 year of on time plan repayment and trustee approval.
Little or No Money Needed - FHA loans allow the seller to pay up to 6% of the sales price toward the closing costs. In addition, Congress has for the time being eliminated Down Payment Assistance programs. There is a movement in the legislature to reinstate these community programs. You can however receive a gift from a family member for the down payment. Give your loan officer a call to find up to date guidelines concerning down payment assistance.
Housing History – FHA does not require a rental or other housing history if it is not available.
Non-occupying co-borrower allowed – FHA allows a non-occupying relative to co-sign the mortgage. The non-occupant’s income and assets can be used for qualification purposes. This is generally used for parents to help their children buy a home. The name for this is the “kiddy condo loan”
Property types - 1-4 unit, condos, town homes, modular homes, and manufactured homes.
No cash reserves required – Unlike most conventional loans, FHA does not require you to have cash reserves on 1-2 unit properties. A borrowers profile is graded on an FHA score card. The FHA score card takes into consideration income, assets, job tenure, debt to income ratio’s and credit scores. Having reserves can help strengthen the overall credit profile.
Fixed Rate Purchase When purchasing a home, an FHA loan is often the right choice. This is especially true if any of the following are true:
• You are buying a 3-4 unit property
• You have less than stellar credit
• You need a cosigner
• You want a low, stable rate
• Your credit score is under 740
FHA fixed rate loans are the most popular programs for FHA financing. Unlike an adjustable rate mortgage, your payment will stay the same for the duration of the loan. Since FHA loans require only a 3% down payment, and allow the seller to pay up to 6% of the purchase price towards the closing costs, you can often buy a home with as little as 2% since your Earnest Money can be applied to your funds to close. Keep in mind you still have to show the bank you have the 3% for the down payment.
HOME BUYING PROCESS >