3 Basic Requirements to Fulfill When Applying for an FHA Loan in Texas
The requirement for an FHA home loan program is designed in such a way that the dream of homeownership is fulfilled easily, especially of the middle-income Americans. They can afford a mortgage payment, but it is difficult to fulfill other requirements of a home loan. However, with FHA loans, homebuyers hardly need to worry about this. And this has made FHA loans the go-to choice for generations for the first-time homebuyers and others.
So, do you want to qualify for an FHA loan in Texas? You may know the basic requirements but that is just the beginning. Here is a closer look at FHA loan requirements Texas and what you need to do to meet this.
Down payment requirement
The down payment is one of the most important of all FHA loan requirements. You can put down as little as 3.5 percent, however, there is more to it than that. In order to get an FHA loan with 3.5 percent down payment, you need to have an FICO credit score of 580 or more than that. But if you have a bad credit, especially, 579 or less than that, you will need to put down at least 10 percent. However, it is not necessary that the down payment will come out of your own pocket. FHA requirements allow you to accept part or whole of the down payment funds as a grant or gift from a relative, friend, your employer, a charitable organization or a public entity offering housing assistance.
Credit scores requirement
Technically, you can qualify for an FHA loan with as low as 500 credit score. But in practice, it would be difficult for you to get a mortgage lender who will approve your FHA home loan with that credit score. Most of the FHA-approved mortgage lenders have minimum credit requirements in the 580 to 620 scores these days, though some are ready to go lower. The lower your credit score, the more difficult it would be for you to get a mortgage lender. However, FHA loan requirements don’t ask for higher mortgage rates from borrowers with a low credit score that is common in conventional mortgages. So, a borrower with a score in the low 600s could get the same rate as someone with a score of 100 points higher. This is why FHA loans can be a good choice for borrowers with flawed credit.
Mortgage insurance requirement
All FHA home loans have a mortgage insurance requirement. It is how the FHA covers the cost of incurring the loans. There are two types of insurance – an upfront mortgage insurance premium that is paid when you take out the loan and an annual insurance premium that is an ongoing expense. All FHA mortgage loans need the upfront mortgage insurance premium that is one-time charge equal to 1.75 percent of the loan amount. It can be rolled out into the loan, so you don’t need to come up with the funds before closing the home loan. The other one is an annual premium. Based on your down payment and type of loan, it varies. While calculated as an annual charge, it is billed as part of your regular monthly mortgage bill in 12 equal payments.
Besides, to get the loan, you should be 18 years old or older, be able to show steady employment and have at least two years with the same employer or running the same business. So, prepare all these, before you opt for an FHA home loan program.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.