Fully Understand Your Mortgage Requirements
The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders.
By doing so, it essentially reduces the amount of risk that a lender would otherwise be exposed to by someone hoping to get a loan for very little money down and with an uncertain credit history.
When you take a moment to fully understand the guidelines and requirements that go into getting approved for a mortgage, you’ll quickly understand that the mortgage industry is a major financial sector within the US economy. To support this, the federal government created several programs to better enable citizens to own property. Noting that loan limits update each year, there are several variables that may dictate whether limits rise or fall. In addition to fluctuations in home prices, loan amounts may be influenced by Fannie Mae and Freddie Mac depending on what is set among conventional loans.
In addition to fluctuations in conventional loan limits, the borrower’s chosen property type, whether single-family or a duplex, may also affect what one is able to borrow. Lastly, and not unique to FHA loans, a borrower’s debt-to-income (DTI) ratio will play a factor in determining the maximum loan amount that may be granted. Specific to FHA loans, however, the current DTI maximum is 43%. This means that your combined monthly recurring debts should, including the mortgage, should not account for more than 43% of monthly earnings.
FHA insured loans require mortgage insurance to protect lenders against losses that result from defaults on home mortgages.
Ginnie Mae is the program that is a wholly owned entity of the US Department of Housing and Urban Development (HUD). This program’s mission is specifically to improve and expand affordable housing. The program did this by originally providing an insurance product for bonds issued by FHA and VA mortgages.
Today, FHA insures home loans on single family and multi-family homes throughout the United States and its territories. Insuring tens of millions of properties since 1934, FHA loan are increasingly popular among millennials.
FHA Guidelines To Learn More About
FHA insured loans require mortgage insurance to protect lenders against losses that result from defaults on home mortgages. Some basic guidelines and topics that you should learn about are listed below:
Why people get FHA loans
Because of that insurance, lenders can — and do — offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements.
- For some, the FHA allows buyers to get a mortgage as their only option
- For others, the FHA may help get a down payment as low as 3.5%
- The FHA underwriting requirements are less strict than conventional loans
- FHA loans help give options to people with less than excellent credit
- FHA refinance loans may give options to those with sub-prime mortgages
- A FHA mortgage is a generally affordable home loan choice
- The program insures the lender, reducing risk in the transaction