It's easy to understand why many people looking for a new home are turning to Federal Housing Administration (FHA) insured loan programs. FHA loans, which are insured by the Federal Housing Administration, may provide a path to homeownership for homebuyers who are having difficulty qualifying for a different type of mortgage. Those who typically benefit most from an FHA loan are first-time home buyers and those who have had credit issues in the past.
As FHA loan specialists, we can help you understand the FHA loan program and how it may benefit you. We're here to create a customized solution that works best for you and your family.
How FHA Loans Work
At Oasis Mortgage LLC, we want to help you understand how an FHA mortgage loan works. It may surprise you to learn that FHA doesn’t lend any money. Instead, it provides insurance to lenders who make loans according to its guidelines. Because of this, the lender may consider you to be a less risky borrower than someone who might not have the backing of the federal government. Our role is to make sure that you understand this unique program. We can help you determine if you qualify and what documentation you’ll need to secure financing with an FHA loan.
FHA Loan Benefits
FHA-insured mortgages can help more people enter the home buying market. Check out the list below to understand some of the benefits of an FHA mortgage.
Easier To Qualify For – because these loans are backed by the federal government, lenders are more likely to give you the kind of loan that you need.
Low Down Payment – FHA-insured mortgages require a down payment of 3.5%, minimizing the amount of money you will need upfront to buy a home.. Additionally, the 3.5% down payment can come in the form of gifts from family members and other parties.
Credit-Challenged Borrowers May Still Qualify – FHA loan guidelines are more forgiving of credit issues than many other mortgage programs. Because of this, those with prior credit issues may have an easier time getting this type of loan.
Better Interest Rates – with the backing of the federal government, these loans typically have a better interest rate than most traditional mortgage loans.
Better Home Stability – the FHA has programs designed to help homeowners keep their homes during hard times.
FHA Loan Checklist
When you're applying for an FHA loan, the following list of documents will help expedite the process. We can help you understand any part of the FHA loan process, so don't hesitate to contact us with any questions.
Employment Info
- Complete tax returns for the past two years.
- All W-2s and 1099s for the past two years.
- All pay stubs received for the past 30 days.
- Self-employed borrowers may need a YTD Profit & Loss Statement and Balance Sheet.
Savings Info
- Complete bank statements for all accounts for the past two months.
- Most recent statements from investment accounts (retirement, 401(k), mutual funds, etc.).
Personal Info
- Driver's License or other official government-issued photo identification.
- Social Security Card.
- Any Divorce, Palimony, and/or Alimony Documents.
- Permanent Resident Card or work-permit (if applicable).
FHA Loan Common Questions
What is the FHA?
- FHA stands for the Federal Housing Administration. It was created in 1934 to help Americans get into homes.
What makes an FHA-insured mortgage beneficial?
- An FHA-insured mortgage may be easier to qualify for, is more forgiving of past credit issues, and requires a relatively small down payment.
Is there an FHA program to help me refinance my loan?
- Yes, you can use an FHA loan to lower your rate and/or get cash from the equity in your home. Contact us now to see what we can do for you.
Can I get a "fixer-upper" of a home with an FHA mortgage?
- Yes, FHA has a loan program available to help you renovate a new home or even one you currently own. Speak with us today for details on this.
Can I pay an FHA loan off early?
- Yes, there is no penalty for paying an FHA loan off early.
Can an FHA-insured loan help me lower energy costs?
- Yes, through the Energy Efficient Mortgage Program, you can finance 100 percent of the cost of making your home more energy efficient. Contact us to see how.
What is the recommended debt-to-income ratio for FHA loans?
- There are two debt-to-income ratios considered when underwriting an FHA loan. The first is the Housing Debt-To-Income Ratio. This is a calculation of how much the new loan plus other house-related costs (property taxes, homeowner’s insurance, any HOA fees, etc.) will be as a percentage of your gross income. The second is the Total Debt-To-Income Ratio. This calculation adds your other debt payments on things like cars and credit cards to the housing cost to arrive at your total debt picture. The recommended Housing Debt-To-Income Ratio is 31% of gross income, while the recommended Total Debt-To-Income Ratio is 43% of gross income. We are often able to get approvals that exceed these debt ratios, so contact us for a complete Mortgage Analysis.
Are FHA loans assumable?
- Absolutely, you can assume an existing FHA loan or allow a buyer to assume yours.
Will I have to pay mortgage insurance with an FHA loan?
- Yes, in fact FHA mortgages often require you to carry mortgage insurance for longer than most conventional loans.
Where can I find FHA forms and other literature?
- A great source for FHA forms and information is https://www.hud.gov/topics/buying_a_home.
What is the FHA loan limit in my area?
FHA Qualifications
In order to qualify for an FHA loan, a borrower typically needs to meet these criteria:
- A history of steady employment for at least 2 years.
- Steady or increasing income over a 2 year period.
- History of on-time payments. While FHA guidelines are more forgiving of credit issues than some other mortgage programs, you do need to demonstrate an ability to handle your obligations.
- If you've had a bankruptcy, you must wait at least 2 years from the discharge date and have reestablished credit with no missed payments since you filed.
- If you’ve had a foreclosure, there must be at least 3 years since the most recent foreclosure was completed.
- The monthly mortgage payment should ideally be roughly 31% of your gross income. We can often get approvals with a higher percentage with compensating factors.
- You must put a minimum 3.5% down payment on any purchase.
- Not all properties will be eligible for an FHA loan. Contact us with any property you are considering to purchase.
- The property must be your primary residence.
FHA Streamline Refinance
If you already have an FHA mortgage, then you may qualify for an FHA Streamline Refinance. An FHA Streamline Refinance is a great way for a borrower with an existing FHA-backed mortgage to reduce their interest rate, reduce their payment, or possibly both.
Here are some really cool facts about an FHA Streamline Refinance:
- No appraisal is required: FHA will allow you to use your home’s original purchase price as your home’s current value.
- You can still refinance even if you are underwater: even if you owe more than your home is worth, you might still be able to get an FHA Streamline Refinance loan.
- There is no FHA prepayment penalty to worry about.
- Employment verification is not required with an FHA Streamline Refinance: in other words, no pay stubs, W-2s, nor tax returns are required for approval. (Note that you may need to provide these items if you are changing borrowers on the loan.)
- Income verification is not required with an FHA Streamline Refinance unless you are adding or removing a borrower.
- While credit score verification is not required with an FHA Streamline Refinance, you will often obtain a better rate by allowing one.. You must have no late payments on your current mortgage in the last 90 days and no more than one late payment within the last 12 months.
- The refinance must have a "purpose" Streamline Refinance applicants must demonstrate that there's a Net Tangible Benefit in the refinance, i.e., a legitimate reason for refinancing. For example:
- refinancing from an adjustable rate mortgage to a fixed rate mortgage, or
- reducing your interest rate + mortgage insurance by 0.5% or more.
- Your loan balance may not increase to cover the new loan costs: FHA prohibits increasing a Streamline Refinance's loan balance to cover associated loan charges. The new loan balance may increase, but only by the cost of the Upfront Mortgage Insurance Premium. All other costs -- origination charges, title charges, escrow -- must either be paid by the borrower as cash at closing, credited by the lender, or some combination of the two.
These materials are not from HUD or FHA and were not approved by HUD or a government agency. In some cases, a refinance loan might result in higher finance charges over the life of the loan.
