Dallas Fort Worth Area Homes and Real Estate

FHA loans are definitely the loan of choice for many home buyers in today's market.  FHA has flexible underwriting requirements, competitive interest rates and offers a low minimum down payment of just 3.5%. 

WHAT IS AN FHA LOAN?

An FHA loan is a loan guaranteed by the Federal Housing Administration.  The money itself does not come from FHA, but they do charge a fee to the borrower to insure the loan for the lender.  Without this insurance, the interest rate would be significantly higher because of added risk to the lender. 

WHAT IS COMMONLY REQUIRED TO QUALIFY FOR AN FHA LOAN?

In general, the following are the minimum requirements to obtain an FHA loan:

• A STABLE CREDIT HISTORY WITH AT LEAST THREE CREDIT REFERENCES THAT HAVE BEEN OPEN FOR TWELVE MONTHS AND ACTIVE WITHIN THE LAST SIX MONTHS.  Credit score requirements vary from one lender to the next, but FHA specifically requires borrowers to have at least this minimum of three credit references.  Some lenders may allow these references to come from non-traditional sources, such as a letter from a utility provider, insurance company, etc. 
• TWO YEARS OF INCOME AND EMPLOYMENT HISTORY that show the borrower's income is likely to continue for at least 2-3 years.  (NOTE - The two year income history may be waived in certain situations, such as for college graduates who just started a job in a field related to their degree). 
• BORROWER MUST HAVE A SATISFACTORY INCOME AND DEBT-TO-INCOME RATIO.  FHA looks at these two specific ratios to determine an acceptable payment for a borrower. 
• PROOF OF FUNDS FOR DOWN PAYMENT AND CLOSING COSTS.  Funds typically must be sourced and/or seasoned for 60 days.  "Sourced" means the borrower must prove those funds came from an acceptable source, such as income from employment, gift from a relative or other type of source acceptable to FHA.  "Seasoned" means money that the borrower has shown in their account for a period of 60 days.  Borrowers who can prove funds have been in their account for at least 60 days typically do not have to show the source of the funds.
• GOOD RENTAL AND/OR MORTGAGE HISTORY is often required as well.  Again, the requirements for this vary depending on the overall circumstances.
• OTHER REQUIREMENTS MAY APPLY. 
• PAST CREDIT ISSUES - FHA has certain specific requirements as far as how long a borrower must be out of both a foreclosure and a chapter 7 bankruptcy.  FHA allows buyers currently in a chapter 13 bankruptcy to obtain a loan if they can show at least 12 months of satisfactory payment history and meet the other loan requirements.  Borrowers currently in a chapter 13 bankruptcy must also obtain written permission from the bankrutpcy trustee to obtain a new loan.  FHA has similar requirements for borrowers in CCCS.  Borrowers with past credit issues, such as late payments, collections, charge offs, reposessions may qualify for FHA financing if an underwriter deems them to be past issues that aren't likely to recur. 

While FHA has their own set of requirements, lenders may also impose overlay guidelines, which are requirements that may be over and above the minimum standards that FHA requires.  For example, FHA does not have a specific minimum credit score at the moment, but virtually all lenders have some kind of minimum credit score requirement for borrowers seeking FHA financing.   FHA will begin requiring borrowers with a credit score of less than 580 to put down at least 10% beginning sometime in the summer of 2010.

WHAT IS INCLUDED IN THE MONTHLY PAYMENT FOR AN FHA LOAN?

FHA is a budget loan, which means the property taxes and home owner's insurance must be included as part of the monthly payment.  Also, FHA charges both an upfront and monthly mortgage insurance premium that insures the loan for the lender in case of default.   

FHA does not require this monthly MIP to be paid on 15 year loans that are less than or equal to 90% LTV.  Buyers who make a larger down payment may also receive a discount on the monthly MIP.  Also, FHA allows the monthly MIP to be removed once the borrower pays down at least 22% of their loan balance, but not before at least five years. 

FHA is changing their requirements for MIP effective on all case numbers issued after April 5, 2010.

WHAT IS THE MAXIMUM LOAN AMOUNT FOR AN FHA LOAN IN DALLAS?

The FHA loan limit for most counties in the Dallas Fort Worth area is currently $271,050.  This loan limit applies to the loan amount calculated BEFORE the upfront MIP is added to the loan.   FHA does not have a maximum sales price, only a maximum loan amount. 

WHAT IS THE MINIMUM DOWN PAYMENT FOR AN FHA LOAN?

For home purchases, FHA requires a buyer to put down a minimum down payment of 3.5% of the purchase price of a home.   The closing costs and prepaid items are over and above the 3.5% down payment.  However, at this time, FHA allows up to 6% of the closing costs and prepaid items to be paid by the seller.  FHA did recently announce that the maximum seller contribution will be reduced to 3% beginning sometime in the summer of 2010.  

The closing costs and prepaids vary from one lender to the next and also vary depending on other factors, such as property tax rates and the insurance rate the borrower is able to secure on the home.  

DOES FHA REQUIRE THE CONDITION OF HOMES TO BE UP TO A CERTAIN STANDARD?

Yes.  An FHA appraiser will inspect the property to make sure the home meets certain property condition standards required by FHA.  These standards were changed in 2005 and are not as strict as they used to be, but the do still require certain items to be repaired before closing can occur.  

HOW CAN I SEE IF I QUALIFY FOR AN FHA LOAN?

Call John Rasor at Homewood Mortgage at (214) 507-1480 or apply online.