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First Time Home Buyers Guide – FHA Loan Qualifications

Home ownership is something many people strive for but are unable to obtain because they have bad credit or are not able to meet the down payment requirements for many banks and financial institutes. The United States federal government helps many people every year become first time homeowners with the help of the Federal Housing Administration home loan program.

What is an FHA Loan?

A FHA loan is a loan that is provided by the Federal Housing Administration. The FHA will insure and backup the loan holder. This backing allows banks and financial institutes to offer you better rates because they have a place that can guarantee that they will receive payment if you default.

Who Qualifies for an FHA Loan?

The basic qualifications for an FHA loan is that the loan holder must have at least two years of steady employment history. The total household income should be steady or increasing over the past two to three years.

Credit history for an FHA loan is flexible allowing people with poor to okay credit to qualify. Credit history must include no more than two third day late payments in the past two years, and a credit score of 610 or higher.

There must also be two years between your loan application and your bankruptcy and foreclosures have to have happened and closed three years ago. However, with a foreclosure you are required to have perfect credit after that.

What is the Down Payment?

With an FHA loan the down payment can be as low as 3.5% of the asking price of the house. Closing and other costs can also be included in the loan.

The Loan Modification Process for Home Mortgage Loans

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Many homeowners are upside down in the mortgage. Not only are they paying more for a home than it’s worth, but they are also spending a huge percentage of their income just trying to come up with the money to pay the monthly mortgage. Many homeowners assume that the only way to get out of a situation like this is through a refinance of the mortgage but there is another solution – loan modification. Loan modification is the ability for homeowners to acquire a new mortgage loan without having to apply for completely new loan.

Just like refinancing there is a process that goes into determining if loan modifications right for you. Here’s a look at the loan modification process.

Bank and Financial Institute Research

Your bank or financial Institute will need to research what your housing ratio is. A housing ratio is how much you are spending on the mortgage payment and how much income you have left over. Most banks require that you have a 31% ratio in order to qualify for a loan modification.

A Hardship Letter

To receive a home modification loan you must present a letter stating your hardship. This letter outlines the hardships that you are facing, why you need a loan modification, and what makes you a good candidate for a loan modification. Essentially a hardship letter explains why you got into the mortgage situation you are in and what you plan to do to get out of this type of situation.

A loan modification can help you save hundreds of dollars and prevent your home from going into foreclosure.

Filed Under: Finance Tagged With: Mortgage loan, Mortgage modification, Refinancing

Determining the Best Time to Refinance Your Home Mortgage

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Many homeowners are in a situation where their home mortgage is more than the house is worth. This can make it difficult because you are paying more for a piece of property that is worth thousands of dollars less. If you found yourself in this type of situation there may be a solution that can help you out. Refinancing your home mortgage can help you get a lower interest rate and hopefully bring your mortgage down to an equal value of the home.

Before you refinance your home mortgage you need to determine if it is the best time to refinance and lock in a lower interest rate. Here’s a look at how you can determine if it is the best time to refinance your home mortgage.

Research Interest Rates

The first step to determine unit home mortgage needs to be refinanced is to research the various interest rates other banks are offering. If the interest rates are higher or similar to the rate you are paying you may want to consider reading to refinance your home. However, if interest rates are lower than what your pain you may want to consider locking in those rates.

Research Industry Trends

Many people make the mistake of refinancing their home mortgage and then a few months later interest rates drop dramatically. To avoid this make sure your research real estate and bank trends to determine if experts are expecting interest rates to raise or lower in the coming months.

Determining if it is the right time to refinance your home mortgage takes a little research but it can save you thousands of dollars in the long run.

Filed Under: Real Estate Tagged With: Interest rate, Mortgage loan, Refinancing