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FHA Mortgage Loan Insurance

If you’re in the market for a new home, it’s quite likely that you have thought about acquiring mortgage loan insurance through the Federal Housing Administration (FHA). Established in 1934, the FHA has helped millions of people insure their properties. Over the years, especially following the economic crisis of 2008, the FHA has implemented requirements for potential homebuyers.

Loan Limits

To remain eligible for FHA loan insurance, consumers must fall within the loan limits. These limits are not only divided by state but are also doled out per county. If you’re curious as to what your state’s FHA loan limits are, you can refer to the Federal Housing Administration’s website.

Debt-to-Income Ratio

This ratio was set to ensure homebuyers do not purchase a property that they cannot afford. By using these calculations, it can be determined whether or not a person has the potential to meet the demands of owning a home.  The ratio is looked at in two different ways:

  • Mortgage payment expense to effective income = Total mortgage payment divided by gross monthly income. The maximum qualifying ratio is 31%.
  • Total fixed payment to effective income = Total mortgage payment added to monthly revolving and installment debt, which is then divided by gross monthly income. The maximum qualifying ratio is 43%.

Credit

FHA requires that a borrower have good credit standing. In order to receive approval, a lender analyzes the borrower’s past credit performance. Loan approval will likely be declined should the credit history reveal slow payments, poor financial decisions, and delinquent accounts.

Other issues are having no credit history, filing for Chapter 7 or Chapter 13 bankruptcy, making late payments, being subjected to foreclosure, and receiving collections, judgements, or federal debts.

Apply for an FHA Loan with First Bank

You have a friend at First Bank to better understand the loan requirements. We work with the Federal Housing Administration to offer FHA insurance mortgages. In order to quicken the process, you can apply online. Just be prepared with some financial information, such as income, assets, and expenses; you will also have to know the property’s information, like the estimated purchase price and down payment (if buying) or estimated property value and loan amount (if refinancing).

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Sources:
http://www.fha.com/lending_limits
http://www.fha.com/fha_requirements_closing_costs
http://www.fha.com/fha_requirements_debt
http://www.fha.com/fha_requirements_credit

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