FHA Loans

A mortgage issued by federally qualified lenders and insured by the Federal Housing Administration. FHA loans are designed for low to moderate income borrowers who are unable to make a large down payment.
FHA Credit Scores & LTV Limits
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Minimum Credit Score Limitations
Product Standard Loan Limits High Balance
Purchase Transactions 640 640
No Cash-Out Refi 640 640
Making Homes Affordable 640 640
Cash-Out Refinance 640 640
Maximum LTV / CLTV Maximum LTV Maximum CLTV
No Cash-Out Refi 97.75%97.75%
Cash Out Refi 85% 85%
Streamline Refi 97.75% 125%
Refi with new 2nd mortgage 85% 85%
(MHA) Refi 97.75%115%
Purchase 96.5%96.5%
Identity of Interest 85%85%
Unrelated Non-Occupying
Co-Borrower 75% 75%
2nd Home (see guides) 85%V85%
Maximum CLTV on ALL loans are shown above and
all mortgages are limited to the Geographical Maximum.
The Federal Housing Administration was begun as part of the New Deal in 1934. It guarantees private home mortgages (FHA loans) and provides funds to promote housing construction, especially for poorer people. It was authorized by the National Housing Act of 1934.

FHA loan is a mortgage loan in the United States insured by the Federal Housing Administration. The loan may be issued by federally-qualified lenders.

FHA loans have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. The program originated during the Great Depression of the 1930s, when the rates of foreclosures and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance. Some FHA programs were subsidized by government, but the goal was to make it self-supporting, based on insurance premiums paid by borrowers.

Over time, private mortgage insurance (PMI) companies came into play, and now FHA primarily serves people who cannot afford a conventional down payment or otherwise do not qualify for PMI insurance.

Eligible Properties
1-4 unit primary residences, Planned Urban Developments (PUDs), Approved Condos. Special eligibility requirements for certain properties are listed below.
3-4 Unit Properties
The 3-4 Unit Property must be self-sufficient. The net rental income must be equal to or greater than the monthly mortgage payment. The net rental income is the appraiser's estimate for vacancies or the vacancy factor used by the jurisdictional HOC, whichever is greater.
Borrowers must still qualify for the mortgage based on income, credit, cash to close, and projected rents received from the remaining units.
Borrowers must have reserves equivalent to three months of PITI mortgage payments. These reserves cannot be gifted and must be the borrowers own funds.
Rural Properties
Rural properties are FHA eligible however no value can be assigned to any acres above 10. The sales price of the property must rely only on the first 10 acres including the house.
Ineligible Properties
If the re-sale date is 90 days or less following acquisition by the seller, the property is not eligible for an FHA mortgage.
Co-ops are ineligible
Commercial properties, boarding houses, hotels and motels, tourist homes, private clubs, sanitariums, and fraternity or sorority houses are also ineligible.
FHA Approved Condo and Townhouse Projects
Buying a condo or Townhouse provides a great opportunity for both first time homeowners and those downsizing their lifestyles. The FHA and HUD have approved FHA loans on condos and townhouses as long as the properties are on their pre-approved list.
The FHA loan process is fairly easy if you do your homework before getting started on the purchase.
Fortunately, you have arrived at the right place and we have made the process easier for you with this simple FHA condo purchasing checklist.
Following these simple steps will get you on your way to buying your condo or townhouse and getting a FHA home loan.

Having a high enough credit score. The FHA recently raised the credit requirement to a minimum score of 640. This is much lower than many banks but it still is a hard and fast rule.
The next step is to find HUD condos and townhouses on the approved list for FHA loans. If the condo community is not on the HUD approved list you can't get qualified. However, it will only take a few seconds to search what is available in your community and we have it right here for you.
To see if your condo is FHA approved go here.https://entp.hud.gov/idap /html/hicostlook.cfm

FHA Mortgage Limits
Knowing your local FHA lending limits is an essential step in the process when considering FHA financing. Clicking on the link below will open a separate browser window directly from HUD. Simply enter some basic information about your location and instantly know local lending limits.
A complete schedule of FHA mortgage limits for all areas are available at: https://entp.hud.gov/idapp/html/hicostlook.cfm
FHA Credit Guidelines
Right now, borrowers with lower than a 640 score are NOT eligible for FHA financing. Further, the FHA requires a minimum credit score of between 640 for borrowers to be eligible for a mortgage with a maximum of a 90% loan to value (LTV) for the property. Per FHA rules, borrowers are eligible for maximum FHA financing (96.5% LTV) with a 640 credit score and above. HOWEVER, lenders who offer FHA mortgages have recently been very reluctant to provide those mortgages to borrowers with lower than a 640 middle credit score.
Credit History
Non-Traditional Credit:
Non-Traditional Credit is acceptable if the borrower does not have any prior credit history or if that length of credit history is too short to qualify. We would need at least three letters from any repeated monthly obligation such as rent, utilities, store accounts, cell phone accounts, and/or any other acceptable sources. Make sure to let your FHA Loan Officer know about your current credit situation to avoid any mishaps in the processing of your mortgage.
Judgments:
Court ordered judgments must be paid completely, unless the borrower has been making regular and timely payments and the creditor is willing to subordinate that judgment to the new insured mortgage. The borrower must provide a satisfactory written explanation.
Collections:
Handled on a case by case basis.
Bankruptcy:
-Chapter 7 requires a minimum two-year lapse period since discharge date; minimum one-year lapse period may be acceptable if bankruptcy was caused by extenuating circumstances that are not likely to recur the reason cannot be debt caused by uneducated choices. Only extenuating circumstances will be considered and only after one year has passed. In all cases the borrower must have re-established credit and must demonstrate the ability to manage financial affairs.
-Chapter 13 is permitted if a one-year payout period has elapsed and performance has been satisfactory. The borrower must receive court approval to enter into the mortgage transaction.
Foreclosures:
Require a minimum of three years since the completion of the action and the borrower must have re-established good credit.
Delinquency or Default on Federal Debt:
If the borrower is presently delinquent on any federal debt or is obligated on any type of federal lien, he or she is not eligible for an FHA loan until the delinquent account is brought current, paid, or otherwise satisfied, or a satisfactory repayment plan is made between the borrower and the federal agency owed and is verified in writing.

FHA Closing Costs and Allowable Seller Paid
FHA closing costs are a significant reason for choosing an FHA home loan. Most traditional mortgages allow only a maximum of 3% seller contribution towards closings costs. With an FHA mortgage, the rules are that the seller is allowed to pay up to 6% of the sales price towards the buyer's closings costs. This is usually more than enough to cover all of your FHA closing costs and even include discount points if you wish to buy down your mortgage interest rate. This, of course, means that you will have more money remaining after the close on your new home.
Having the seller pay for some or all of your FHA closing costs can be a part of your negotiation when buying a home. Make sure to bring this up with your real estate agent and attorney at the very beginning of the home buying process.
FHA Loan Checklist
When you're applying for an FHA loan the following list of documents will help expedite the process. We can help you understand any part of the FHA loan process so don't hesitate to contact us with any questions.
Employment Info
Past two years completed tax returns.
Past two years W-2's, 1099's and any other necessary tax forms.
One month worth of newest pay stubs.
Self-employed will need three years tax returns and YTD Profit & Loss Statement.
Savings Info
Past three months full bank statements for all accounts.
Any recent statements from investment accounts (retirement, 410k, mutual funds, etc.).
Personal Info
Driver's License or other official State identification.
Social Security Card.
Any Divorce, Palimony, Alimony Documents.
Green card or work-permit (if applicable).
FHA Loan Common Questions
Check out our list of common questions related to FHA mortgages. Check out our list of common questions related to FHA mortgages.
What is the FHA?
FHA stands for the Federal Housing Administration. It was created in 1934 to help Americans get into homes.
What makes a FHA insured mortgage beneficial?
A FHA insured mortgage is easy to qualify for, can be obtained with less than perfect credit, costs less and requires a smaller down-payment.
Where can I find FHA forms and other literature?
A great source for FHA forms and information is http://www.hud.gov/library/index.cfm.
What is the FHA loan limit in my area?
The loan limit across the country is different. Click here to see limits in your area.
Can I pay an FHA loan off early?
Yes, however be sure to check the pre-payment section of your contract before signing.
Can a FHA insured loan help me lower energy costs?
Yes, through the Energy Efficient Mortgages Program you can finance 100 percent of the cost of making your home more energy efficient. Contact us to see how.
Is there a FHA program to help me refinance my loan?
Yes, the recently create FHASecure is one of the ways that we can help you refinance your current home loan. Contact us now to see what we can do for you.
Can I refinance a fixed rate FHA loan?
Yes. Talk with one of our professionals today to see if refinancing makes sense for you.
What is the recommended debt-to-income ratio for FHA loans?
The recommended debt-to-income ratio for a FHA loan is 30%.
Are FHA loans assumable?
Absolutely, you can assume an existing FHA loan or allow a buyer to assume yours.
Will I have to pay mortgage insurance with an FHA loan?
Yes, in fact FHA mortgages often require you to carry mortgage insurance for longer than most conventional loans.
Can I get a "fixer-upper" of a home with a FHA mortgage?
Yes, however you might be required to fix certain problems in the home before you can get the full loan. Speak with us today for details on this.
Quick Links
Apply for a FHA Loan
FHA Loan Checklist
Common FHA Questions
FHA Qualifications
Benefits of FHA Loans
FHA Qualifications
Qualifying for a home mortgage loan can be difficult, near impossible without a sizable down payment and a moderate credit report. If this describes you and you financial position, an FHA loan may be for you! There are fewer restrictions for FHA loan qualification in comparison to a
standard mortgage loan. Qualifications for an FHA loan are:
Proven employment status of at least 2 years.
Steady or increasing income over a 2 year period.
History of on-time payment. No more than two missed payments on your credit.
If you've filed for bankruptcy you must wait at least 2 years and have good credit since you filed.
Those with foreclosures must wait at least 3 years since the most recent foreclosure.
Monthly mortgage payment should be roughly 30% of your gross income.
You must pay a minimum of a 3.5% down-payment.
Agree to 2.25% in closing costs
Only certain properties are eligible - single-family homes, condominiums and 2-4 unit properties.
The property must be your primary residence.