An Overview Of FHA Loan Guidelines
Saturday, October 15, 2011
The Federal Housing Administration is the largest residential mortgage insurer in the world. The FHA insures mortgages for both single-family and multi-family homes, as long as mortgages are obtained from FHA-approved lenders. FHA loan guidelines, which are established by law, may be reviewed at a nearby HUD office, or by consulting the FHA website.
Mortgage insurance is required for many loans. Mortgage insurance protects lenders from losses, when borrowers default on a mortgage. Mortgage insurance is required for down payments of less than twenty percent of the cost of the home, and premiums start at one percent of the monthly mortgage payment.
Individual local HUD offices determine closing cost allowances. Closing costs are part of any lender transaction, and include those line items deemed customary, and reasonable. Examples of closing costs include charges for pulling credit reports, title insurance, and appraisals.
Borrowers must maintain specific debt-to-income ratios. The maximum mortgage expense, as a ratio of total income, is twenty-nine percent. The maximum allowed debt, including the mortgage payment, in addition to credit card payments or car payments, is forty-one percent of income.
Borrowers who apply for FHA loans must meet specific credit requirements. For example, borrowers who have been through bankruptcy, must be either two years away from a Chapter 7, or must have been making payments for one year, on a Chapter 13. Also, foreclosures up to three years prior, collections, or delinquencies on federal debts or other judgments, will make borrowers ineligible. Additionally, borrowers must maintain two open credit lines, to demonstrate an acceptable credit history.
Mortgage limits are decided by each state, and are broken down by county. Limits on single-family and multi-family homes are listed out on the FHA website, or available at a local HUD office. Additional information on FHA loan guidelines are also available online, or from a local HUD office.
Mortgage insurance is required for many loans. Mortgage insurance protects lenders from losses, when borrowers default on a mortgage. Mortgage insurance is required for down payments of less than twenty percent of the cost of the home, and premiums start at one percent of the monthly mortgage payment.
Individual local HUD offices determine closing cost allowances. Closing costs are part of any lender transaction, and include those line items deemed customary, and reasonable. Examples of closing costs include charges for pulling credit reports, title insurance, and appraisals.
Borrowers must maintain specific debt-to-income ratios. The maximum mortgage expense, as a ratio of total income, is twenty-nine percent. The maximum allowed debt, including the mortgage payment, in addition to credit card payments or car payments, is forty-one percent of income.
Borrowers who apply for FHA loans must meet specific credit requirements. For example, borrowers who have been through bankruptcy, must be either two years away from a Chapter 7, or must have been making payments for one year, on a Chapter 13. Also, foreclosures up to three years prior, collections, or delinquencies on federal debts or other judgments, will make borrowers ineligible. Additionally, borrowers must maintain two open credit lines, to demonstrate an acceptable credit history.
Mortgage limits are decided by each state, and are broken down by county. Limits on single-family and multi-family homes are listed out on the FHA website, or available at a local HUD office. Additional information on FHA loan guidelines are also available online, or from a local HUD office.
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