How, precisely, does one qualify for FHA loan? This query is in the minds of a lot of people right now who all want the benefit of this government insured loan.
But first, one must define what FHA loans really are.
The FHA or the Federal Housing Administration was created during the time of the Great Depression right around the 1930's.
They do not actually make the housing loans, they insure the loan so that those borrowers who are not able to make payments can afford it.
If the borrower defaults on a loan from the FHA, then the federal government will cover the remaining balance of that loan.
Most private lenders love the FHA for this reason since they will not have that much risk involved when giving out loans.
So if the FHA pays for the insurance, then does this mean that it uses government tax money for this use? This is what most people think and it is a misconception.
You see, each loan from the FHA has an added requirement for the borrower to pay a reasonable insurance premium fee.
This premium goes to the FHA funds and these same funds are used for the rare times when people will default on the mortgage.
Usually, this cost is the amount of the loan times a certain value.
This is not a problem because the same thing also applies to most if not all traditional loan offerings as well.
Only with a loan from the FHA, the rates are way lower than the traditional loan offerings.
So now that you know what the FHA is and how it functions, the next thing you should know is how you can qualify.
In truth, this really is not much of a problem because the FHA housing mortgage is the most accessible and the easiest kind of mortgage that one can possibly qualify for.
The requirements cannot get any simpler and affordable.
Also, the flexibility of the choices afforded for you are mind blowing.
What's more, one does not have to pay more than 5 percent the amount of the principal loan as a down payment.
Here are the basic guidelines one will have to know in order to qualify for FHA loan: -The past two years of one's income should not show a decrease in amount.
-One must have at least two full years of steady employment.
It is more desirable that in these two years, one served under the same company.
-One's credit report should not be perfect but it should not have more than two lates in the latest year.
There is also a minimum of usually 620 regarding the credit score however some do not even require a credit score at all.
-If there is a foreclosure, it should be at least three years past and one's credit should have been very good before that event.
-If there is a bankruptcy, then it should be at least two years past and one's credit should have been very good before that event.
-The mortgage you want to get should be just around 30 percent of one's monthly salary in order to qualify for FHA loan.