FHA Loan Requirements for All Types of Buyers in 2021
Many second-time buyers consider the FHA program exclusive for first-time buyers, and the problem starts here. The relaxed qualifying requirements might nudge this popular belief. In the housing market, of course, anyone who has not purchased a house in the last 3 years is again termed as a first-timer. So would you label yourself as an actual first-time buyer or a repeat buyer? Either way, FHA loans are a viable option.
So, how does the loan work? The Federal Housing Administration protects the lender if the buyer defaults on mortgage payments. This is the main reason why FHA-approved lenders manage to offer forgiving eligibility requirements. But have you prepared for the FHA loan requirements Texas? Without going over the requirements, you cannot land the mortgage program successfully. Yes, the requirements are applicable to all types of homeowners.
The article further deals with the FHA qualifying requirements. So, let’s take a look below.
- DTI Guidelines
Irrespective of the FHA loan you pick, lenders check the debt-to-ratio guideline. This is indicated by the percentage of pretax income. Yes, the amount you spend on credit cards, debt payments, auto or student loans, and other financial obligations are considered. By using a calculator, you can understand your financial situation better. The program needs a DTI ratio of 50%. The requirements change every day on the basis of FICO scores and additional factors.
- Property Requirements
The FHA loan amount cannot surpass the mortgage amount limit in the area you are purchasing the property. In 2021, the limit for high-cost areas is set at $822,375. For the low-cost areas, the limit is $356,362. The house needs to qualify for the FHA minimum property standards for security, safety, and structural integrity. If you purchase the house, it should become your primary residence. Also, you need to make the place your primary address within 60 days.
- Mortgage Insurance Guidelines
As you know, you cannot escape the FHA mortgage insurance. At closing, you need to prepare for 1.75% of the mortgage amount. Annually, over the life of the loan, you need to pay 0.45%-1.05% of the loan amount. How much you need to shell out thoroughly depends on your loan term, size, and down payment.
- Necessary Documents
For every mortgage application, documentation is an integral process. The FHA-approved lenders are likely to ask for your social security number, tax returns, pay stubs, and W-2 forms. The requirements for documents vary from one lender to another, so you need to ask before applying.
The credit score requirement remains the same as before. You can get an FHA loan with a credit score of 500. For this, you need to apply for a 10% down payment. If you want to get the popular 3.5% down payment option, you must have at least a credit score of 580.
The FHA loan requirements differ according to the rules of a lender in Texas. It’s better to shop around and understand whether you can qualify for the program. So, do a lot of research before finalizing your option.