Articles Published in: 2010

November 24, 2010

How Much is the FHA Debt-to-Income Ratio?

The FHA has a maximum debt to income ratio set for FHA loans. When a borrower applies for an FHA mortgage, they must list all debts and lines of credit in detail as well as all possible approved income sources. With this information, the lender and FHA can calculate what a borrower's debt picture is and issue a percentage of debt to the amount of income listed. For FHA home loans, the rules are clearly spelled out. According to the FHA official site, "The FHA allows you to use 29% of your income towards housing costs and 41% towards housing expenses and other long-term debt."

November 23, 2010

An Introduction to the FHA Debt-to-Income Ratio

By Joe Wallace

FHA loans require many things from the borrower. The credit report, residence history, employment history and a list of all current outstanding debt must all be furnished to give the lender and the FHA a good picture of the borrower as a credit risk. When it comes to government home loans, all the information is needed since credit scores are not the determining factor in whether or not the FHA mortgage is approved. An FHA borrower with good credit, a solid work history and a track record of on-time payments would seem to be a shoo-in for an FHA home loan. But there's one thing that can offset the good things for the borrower if his or her debt-to-income ratio isn't within the limits for an FHA loan.

November 22, 2010

How Long Do I Have To Be Employed to Qualify for an FHA Loan?

By Joe Wallace

The FHA loan application process includes many steps, including running a credit report and having the FHA borrower fill out paperwork with personal information like open lines of credit and current income. Applying for a government home loan also requires giving the lender two types of personal history--a record of where the borrower has lived and where the borrower has worked. FHA requirements dictate furnishing at least a two-year work history, but that requirement shouldn't be mistaken for an employment minimum. According to the FHA's official site, "FHA does not impose a minimum length of time a borrower must have held a position of employment to be eligible for a mortgage."

November 22, 2010

How Much Income Do I Need to Qualify for an FHA Home Loan?

By Joe Wallace

"How much income do I need in order to qualify for an FHA home loan?" That is one of the most popular questions many first time home buyers ask about getting an FHA mortgage. The answer often comes as a surprise. The FHA has no minimum income requirement--there is no dollar amount listed as the baseline for which FHA loans are approved. What the FHA does require is a history of steady income for at least three years. That FHA requirement should not be misinterpreted--it does not establish a minimum length of employment at any one company. It is intended to set a minimums for steady income rather than attempt to gauge employability or longevity at any one firm.

November 19, 2010

How FHA HECM Loans Work

By Joe Wallace

The FHA offers a wide range of home loans and government home loan refinancing programs, but one in particular is just for seniors who have equity in their homes. Known as a HECM or Home Equity Conversion Mortgage, the FHA advertises HECM loans as "a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more."

November 18, 2010

Home Inspection Advice for FHA Borrowers

By Joe Wallace

FHA appraisals, which are not the same as independent home inspections, are conducted for three reasons. According to the FHA, appraisals are conducted, "To estimate the market value of the property...to make sure that the property meets FHA minimum property requirements...(and) to make sure that the property is marketable." FHA borrowers should pay for an independent inspection of the home for two important reasons--the first being that FHA appraisals will only catch problems that are "readily observable" by the appraiser.

November 18, 2010

FHA Appraisals VS. Home Inspections

By Joe Wallace

here are two specific fees associated with government home loans that a borrower should anticipate paying for. One is to cover the cost of an FHA appraisal, the other is for a home inspection. The home inspection is voluntary, and the FHA appraisal is required as part of the FHA loan process. A home inspection may be voluntary, but smart house hunters don't consider the inspection an option. The home inspection gives the buyer the ability to purchase the home with confidence, knowing they have had a trained set of eyes review the property and report any shortcomings, defects, flaws or potential problems the buyer might encounter once they've purchased the home.

November 17, 2010

Government Home Loans and Anti-Discrimination Laws

By Joe Wallace

The FHA and Department of Housing and Urban Development have an aggressive anti-discrimination policy. FHA home loans are meant for all qualified applicants regardless of race, color, national origin, religion, sex, familial status or disability. Most people are aware that refusing to issue credit, show a home or approve an application for those reasons is illegal. Even in so-called gray areas such as a loan applicant on maternity leave or suffering from a temporary disability that affects the ability to earn a paycheck have been challenged successfully; a lender or real estate agent can't refuse to do business with a qualified applicant in such cases.

November 16, 2010

What is FHA Mortgage Insurance For?

By Joe Wallace

On the surface, FHA mortgage insurance seems designed mainly to protect the lender's interest. FHA mortgage insurance is designed to mitigate the bank's losses in case the FHA loan goes into default and foreclosure. But this insurance does more than just protect the FHA lender--it also helps the buyer. The Housing and Economic Recovery Act of 2008 requires FHA mortgage insurance on all new FHA mortgages. The FHA loan applicant must, once approved, pay for this insurance--costs that include an up-front mortgage insurance premium and monthly insurance payments along with the mortgage. The fees and terms of FHA mortgage insurance depends on what kind of FHA loan the borrower wants. Other factors include the length of the loan term, and loan amount to property value ratio.

November 15, 2010

Who Selects the FHA Appraiser?

By Joe Wallace

When applying for a loan to purchase a home with an FHA mortgage, the appraisal of that home is one of the most important steps in the process. Without an FHA appraisal, the entire process is stalled after a certain point until the job is done. FHA appraisals require the buyer to anticipate fees associated with doing the work, and the seller must anticipate costs associated with repairing items that could lower the appraised value of the property.