Brief Information about FHA Loans

Most people think that it is difficult to obtain an FHA loan, but it really isn’t.  As a matter of fact, FHA loans are much easier to get than traditional loans.  This loan is a program of the HUD or the Department of Housing and Urban Development, which has the purpose of helping residents of the U.S. to easily own a home.  Although the country is experiencing a financial crisis, this never has affected the process of getting an FHA loan.  Actually, it became even a lot easier to apply for one.  However, I’m not speaking for all people.  I’m only particularly speaking for individuals who have plans of buying a home for the first time.

When you are interested to avail of an FHA loan, it is really crucial to look for a reputable FHA loan provider.  Once you have successfully found a creditor that you think is trustworthy and reputable, you now have to know the requirements needed in applying for an FHA loan.  You’ll find them below:

Debt-to Income Ratio Requirement

As compared to traditional loans that require a debt-to income ratio of 28% (housing):36% (other expenses), an FHA loan has a ratio of 29% (housing):36% (others expenses), which is a lot better.

Income Requirement

Unlike traditional loans, an FHA loan does not have an income requirement.  As long as you have a stable monthly income for the last 3 years, you are welcome to apply.  It is also important that your loan provider will see that you have been settling your bills promptly.

FHA loan providers also take into account the income that you are supposedly receiving from child support, pension, retirements and even your income from your seasonal jobs.  They also usually consider disability or Social Security benefits, VA benefits, income from properties you rent out, unemployment benefits, yearly bonuses, overtime pays, and all other sources of income.

Credit Rating Requirement

When applying for an FHA loan, mortgage providers do not require you to have a credit history. This is an ideal loan for young people and for those who prefer making purchases with the use of cash.

Down Payment Requirement

In an FHA loan, you will only be required to pay a down payment of 3.5%, but in a traditional loan, the down payment is at 10%.  Another nice thing about this is that the down payment does not necessarily have to come out from your pocket. This means that even if you do not have enough cash to finance the down payment of a home, you still can obtain an FHA loan provided that you meet the other requirements.