Recent changes in the mortgage industry have made it more
difficult to qualify for a conventional home loan, especially
if you try to get a mortgage with a high loan to value, or lower credit
scores.
Now that FHA has increased
their
cap on mortgage loan limits, more borrowers are able to take advantage of the flexible qualifying requirements for buying a home, or refinancing a mortgage loan.
If
you happen to have an existing FHA home loan, you may have the opportunity
to reduce the monthly loan payment using an FHA
streamline refinance, which requires no income verification.
Benefits of an FHA Home Loan Compared to a Conventional
Mortgage:
Cash out FHA loans have high limits, up to 85% loan to value
Purchase loans have higher loan limits up to 96.5% loan
to value
Higher FHA loan limits are based on the location of the
property
Flexible underwriting provides for credit
scores as low as 620
A higher debt ratio is allowed in comparison to
conventional loans
FHA loan rates are comparable to conventional home loans
Non-occupant co-borrower may be added to help qualify
Certain closing costs have limitations which are set by
FHA
A previous bankruptcy only needs to be discharged for 2
years
Collection accounts may not have to paid to close a loan
FHA loans may not have a requirement for any cash reserves
With
every FHA home loan, there is a mortgage insurance premium of
1.75%,
which can be financed into the mortgage.
There is also a monthly insurance premium that is added onto the
payment. Condominiums do not require the up-front premium, only the
monthly amount. For information onnon-approved condo projects, see FHA
spot loans.
The debt ratio is 43% of gross income, for all debts, unless there
are good compensating factors to offset, such as: Documented ability to pay more than the proposed loan payment;
demonstrated ability to accumulate savings; minimal increase in housing expense; potential
for increased earnings; substantial non-taxable income; good credit history.
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