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FHA Mortgage Financing - Are you a First-Time Buyer?
Dated: July 10 2019
Are you a first-time buyer?
The mortgage programs offered through the Department of Housing and Urban Development’s Federal Housing Authority can be easy ways for borrowers with limited or lightly bruised credit to enter the housing market with confidence. Of course, like with any mortgage, FHA loans aren’t for everybody. But they are really good for many people.
Let’s get to know the loan most people are talking about when they say they need an “FHA loan,” the FHA Basic Home Mortgage Loan 203(b) (what a mouthful!).
Who Is This Loan For? Before you waste your time, reading this whole blog, it vital to learn that you’re not a good candidate for this loan, let’s get it all out up front, shall we?
FHA mortgages are good for a wide range of people, especially those with credit scores in the mid- to upper 600s with minimal down payments.
FHA is forgiving of some sins, including unpaid medical bills, but is less tolerant of monthly payments for things like revolving loans and secured loans (known as your “debt-to-income ratio”). Where Fannie Mae’s conventional loans may let you have upward of about 45 percent of your income going to monthly debts and housing, FHA mortgages are much more selective.
Your housing debt can’t exceed 31 percent as of the writing of this blog; your overall debt has to be below 43 percent at this moment. Looking at that more concretely, it broken down like this if you make $50,000 annually:
– Your monthly income: $4,166.67
– FHA housing debt allowed: $1,291.67
– FHA total debt allowed (includes housing) : $1,791.67
– Conventional debt allowance: $1,875
But that’s not to say that the FHA loan is a bad mortgage. It’s a really decent one, only that it has a lot of rules designed to ensure you succeed at home-ownership.
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