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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
You will be asked to provide proof of self-employment as well as a 2-year income history to prove your “taxable” earnings.
Part-time income: 1-2 year history of earnings required along with confirmation of employment.
Pension income: 2-year history of earnings via cheque slips and/or bank account statement showing pension deposit.
Disability income: must be long term and confirmed with documentation.
Child Support or Alimony: can be used if the divorce or separation agreement confirms the amount though some lenders will also want to see proof it has been deposited to your bank account for last 3-6 months too
Seasonal Employment: minimum 2 year history of earnings required along with T4s and/or Notice of Assessments and employer confirmation.
Rental income: lease agreements and/or tax returns confirming amount of the rents from rental properties or legal suites.
2 years income tax documentation for part-time, bonus, or overtime to use an two year average.
Louisville Kentucky First Time home Buyers programs including, FHA, VA, KHC, and USDA, Rural Housing Zero Down home loans–Our site is updated daily for Louisville Kentucky first time home buyers with the best programs and rates