Homebuyers who choose an FHA mortgage loan must review all requirements for the mortgage home loan program. Lenders must complete an assessment of the applicant’s credit history and verify all information provided on the application. Reviewing important details about an FHA mortgage loan helps the borrower learn what to expect.
Qualifying Credit Score for an FHA Mortgage Home Loan
Borrowers who want to apply for an FHA mortgage home loan must review their credit ratings on all three credit bureaus. It’s important to eliminate negative listings on their credit history whenever possible. For example, paying off smaller debts increases credit ratings and helps more consumers qualify for the home mortgage loan of their choice. The base credit score for an FHA mortgage home loan is 580.
The Down Payment Requirements
After the borrower is approved for an FHA loan, the lender calculates the down payment required to secure the mortgage home loan. The down payment is based on the borrower’s creditworthiness and credit scores. Typically, the down payment is 3.5% of the total mortgage home loan amount if the borrower has a credit score of 580 or higher. However, if the lender approved the mortgage home loan at any score lower than 580, the borrower will need to pay at least 10% of the total mortgage home loan amount to secure their mortgage. Some first-time home buyer’s programs might give the buyer the opportunity to avoid a down payment altogether.
How Many Lines of Credit Should a Borrower Have?
When reviewing the borrower’s credit history, lenders determine if the applicant has enough credit to make a complete assessment of their creditworthiness. Typically, lenders prefer borrowers who have at least two lines of credit open when they apply for mortgage home loans. Each of these listings should be in great standing and give the borrower a better credit rating. However, most borrowers who apply for mortgage home loans have more than two lines of credit open.
Will You Qualify if You Have a Foreclosure On Your Credit?
Yes, borrowers who have faced foreclosure can qualify to get an FHA mortgage home loan through their preferred lender. Typically, borrowers should wait at least two or three years after the foreclosure to approach a lender to buy another home. If the applicant can improve their credit rating within two or three years, it is also possible to get a better interest rate on their mortgage home loan.
Income to Debt Ratio Requirements
Income-to-debt ratio requirements define whether or not the borrower can afford a mortgage home loan. The ratio reflects the percentage of income left over after the buyer pays their monthly expenses including the mortgage payments and insurance. The maximum income-to-debt ratio for an FHA mortgage home loan is 43%.
Homebuyers must qualify for the FHA mortgage home loan based on their credit scores and income. A complete assessment is conducted by the lender to determine if the loan is affordable according to federal laws. Homebuyers who want to learn more about the mortgages can contact National Realty Investment Advisors now.