FHA Eligibility
Are you interested in the FHA loan? Since the 1930s, the U.S. government has installed programs that help homeowners borrow money to buy a house.
Not everyone is eligible for an FHA loan. You must meet certain criteria outlined by the Federal Housing Administration in order to be eligible for a loan.
Also, be prepared to provide lots of documentation and proof for the following items:
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Legal U.S. Resident
You’ll need to provide proof of legal residency and a Social Security Number.
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Legal Age to Get a Mortgage
You must be of the legal age to apply for a mortgage in your state.
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Employment and Income
Ideally, you can prove you have two years of consistent employment, preferably with the same employer, and that your income has either stayed the same or increased. You’ll need to provide W-2s, income tax statements, and pay stubs.
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Credit Score
FHA loans require borrowers to meet credit guidelines. Check with a lender, as credit score requirements may vary.
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Debt-to-Income and Payment-to-Income Ratios
Lenders will review your income and compare it with your debts to determine if you meet FHA eligibility requirements. Your expected mortgage payment should be around 30% of your income (before taxes and withdrawals).
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Down Payments
FHA loans require a 3.5% down payment. These funds can be gifted.
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Three Years After Foreclosure, Two Years After Bankruptcy (For Non-Homeowners)
If you foreclosed on your previous home, you must wait three years before applying for a new FHA loan. Approval will depend on your credit history and documentation during the loan process. If you have experienced bankruptcy, you must wait two years before becoming eligible for an FHA loan. If you were a homeowner during bankruptcy, you must wait three years.
FHA Streamline Refinance
The FHA Streamline refinance was retooled in 2011 to help those already in an FHA mortgage take advantage of lower interest rates. Instead of getting your home appraised, you can refinance based on the original purchase price of the home and not its current value. This is extremely advantageous for those underwater in their FHA mortgages.
Although you do not have to verify your employment or income – or even have your credit pulled – on an FHA Streamline refinance you will need:
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Current on Your Loan Payments
You must be current on your loan payments. Only one late payment within the past 12 months is allowed, and there can be no late payments within the past three months.
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Waiting Period
You cannot refinance back-to-back. You need at least six payments on your current loan, and there must be at least 210 days between your refinances.
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Show a “Tangible Benefit”
Some acceptable reasons include reducing your monthly payment or getting out of an adjustable-rate mortgage. (Not simply obtaining extra cash.)
