For those who want to buy a house in this market crunch and economic slowdown times, home buying can be tough. But, for those who have the money or what it takes to take a mortgage, the low home prices are blessing in disguise. For you who do not have fantastic credit but desperately need to buy a house, FHA home loans is a thing to consider. FHA home loans provide the flexibility a first time homebuyer may need.
Due to the sub prime mortgage melt down, lenders have made it more hard to qualify to buy a home, that’s where FHA home loan could come in handy. FHA home loan require less much down payment (3%) as a conventional loan (5%). An FHA home loan allows you to buy a home, even if your debt to income ratio is higher than 43% – you just have to have other compensating factors such as cash reserves in the bank or a 401 (k) plot with your employer. It has more relaxed credit requirements compared to the conventional mortgage.
FHA home loan won’t include many negative things on a credit report, such as medical bills, as a main consideration in qualifying for a loan. Some lenders will even approve those with low credit score 550. Just this one factor alone can give huge difference between getting approved for a FHA loan and being turned down by a conventional lender. You’d also have lower than typical interest rate with the FHA loan
With FHA loans, many homebuyers have the chance to buy a house without giving any money for down payment but since October 1st 2008, FHA stopped accepting seller down payment help programs.
The FHA down payment help program helped homebuilders and home sellers give the seller the money necessary for the down payment and the buyer’s closing cost. The current FHA home loan program does still allow for 100% financing, a relative of the buyer can give or loan the money to the buyer. But just remember that if the buyer borrows the money from a relative or a close friend of the family, this loan will also count against your debt to income ratio. As long as you’re debt to income ratio is below 43% you should not have a problem getting this type of financing.
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