The Federal Housing Administration (FHA), which is a part of the Department of Housing and Urban Development, has been around since 1934. They were set up with the objective of promoting ownership of housing among Americans. FHA loans fell from grace during the heyday of the subprime loan boom because of their relatively stringent conditions and limits on value of houses. As the fallout of the subprime loan bust, these loans are back in favor and with good reason. They are among the easiest mortgages to obtain because of the low down payment and the flexibility of their requirements.
FHA by itself does not either make loans or guarantee them. What it does is provide credit insurance to mortgage lenders which removes or reduces default risk in case the down payment is less than 20 percent. Lenders approved by FHA are authorized to accept loan applications, process them and approve loans without further reference to FHA. FHA loans are ideal for people looking to buy Longmont CO homes for sale for the very first time. Here are some of the important eligibility criteria for FHA loans:
Credit history. If you have had minor credit problems in the past few years, FHA is willing to overlook them if you can provide a "reasonable explanation". The credit history will be scrutinized in detail for the past two years so make an effort to keep a clean sheet for this period. Any outstanding claims of judgments will have to be satisfied before the loan is approved. Even if you have been in bankruptcy or been involved in a foreclosure, FHA will consider your case provided your credit record is unblemished for the two or three years prior to the application.
Income criteria. FHA has more lenient standards than most mortgage lenders. Provided the loan repayments do not account for more than 35 percent of the income (as opposed to 29 percent for commercial mortgage lenders), you should qualify for the loan.
Debt-to-income ratio. Here again FHA is far more flexible and only requires that when the proposed repayments on the mortgage are taken into account, the debt to income ratio should not exceed 40 percent. In other words, payments towards all your debt should not exceed 40 percent of your income.
Employment history. Your employment history will be scrutinized in detail for the two years prior to the application. Your previous employers will be asked to fill out a simple form to prove that you have been in employment with them. Two years gainful employment, not necessarily by the same employer, is essential to obtain an FHA loan.
Asset check. FHA will contact all your banks and depositaries to verify the average balance is held by them for the last three months. As a precaution and a similar to what other lenders would expect, FHA expects you to keep balances as a cash reserves to cover three to six months commitments.
With organizations like FHA making it fairly easy to get loans, first-time home buyers in
Colorado Springs CO can make their dreams of buying a home come true just as people from other cities like Conifer CO are taking advantage of it.
