Here is my Top 5 List for getting a Kentucky FHA Mortgage Loan: 1.A Low Down Payment – Kentucky FHA Mortgage Loans only require a 3.5% down payment. And what makes that even more attractive is tha…
Source: Kentucky FHA Loan Guidelines
FHA Guidelines: How to Qualify for an FHA Loan
The first step to qualifying for an FHA loan is to work with a loan officer at an FHA approved lender. General FHA guidelines that the loan officer will discuss with you include:
- Documenting an employment history over the last two years. FHA guidelines consider the last two years of employment and look at a steady pay history or employment with the same employer.
- Providing a valid social security number and proof that you’re a resident of the United States. There are exceptions for resident aliens, but these exceptions will vary by lender.
- Producing the necessary down payment. FHA loans require a minimum down payment of 3.5% when buying a home — but the down payment may be a gift under certain conditions.
- Performing the necessary due diligence. The property will need to be inspected by an FHA appraiser and an FHA approved appraisal must be done.
- Assessing how much you can afford. Although there is some flexibility, the total monthly mortgage payment generally should not exceed 30-32% of your gross monthly income.
- Assessing your level of debt. Your total debt should not be more than 43% of your gross monthly income. Again, there is some flexibility with this number, but this is a good guideline.
- Note from mortgage professional, Albert Bui, “the 43% DTI to income is mainly a guideline max for many loans out on the market to comply with certain qualified mortgages (QM) guidelines however in reality the max on FHA I’ve seen is 46.99% on the front ratio (housing payment only) and 56.99% on the backend when factoring in all other obligations. So this means you can borrow up to 46.99% on the front ratio for your housing payment but it doesn’t mean the borrower should max it out, rather they “can.”
- Knowing your credit score. Minimum credit scores now apply with FHA loans and can vary by lender. A credit score of 580 and above requires a 3.5% down payment, and a credit score of 500-579 requires a 10% down payment. Credit score requirements will vary by lender.
- According to Mr. Bui, “a 3.5% down payment is the min however there are many down payment assistance (DPA) programs that will either grant you the 3.5% for free with no repayment’s, offer the borrower a 3.5% community 2nd loan that is silent (no payment) and may be forgivable after a certain period of time, or a 2nd that has a silent payment but is due at a certain period of time or payoff in the future. So you can bring in as little as $0.00 with qualifying income or additional requirements.”
- Disclosing prior bankruptcies. If you have had a bankruptcy that has been discharged, the waiting period is 2 years.
- Disclosing prior foreclosures. If you have had a foreclosure, the waiting period is 3 years, and you must have good credit
Conventional Mortgage May Be Cheaper Than FHA.
A primary reason for the decline is due to the increase in mortgage insurance premiums and a new rule that no longer allows borrowers to opt out of mortgage insurance after establishing a steady record of payments.
Newsday reports that FHA borrowers are charged an annual mortgage insurance premium of up to 1.35% of the borrower’s outstanding balance on their loan, which is added to their monthly payment. Additionally, a fee of 1.75% is charged up front once the borrower closes on the loan.
For example, Newsday demonstrates exactly how the extra fees can add up: A borrower getting a $200,000 loan, after making a 3.5% down payment, pays $225 per month in FHA mortgage insurance, plus an upfront fee of $3,500. Say you keep that mortgage for 10 years before you sell or refinance — that adds up to about $30,000 in mortgage insurance fees.