What is an FHA loan? www.ospreymortgagelending.com
FHA home loans are mortgage loans that are insured against default by the Federal Housing Administration (FHA).
FHA Loans
FHA loans are available for single-family and multifamily homes. FHA loans allow individuals who may not qualify for a conventional mortgage to obtain a loan, especially first time home buyers. FHA doesn't issue loans or set interest rates, it just guarantees against default.
Employment • Complete Income Tax Returns for the past 2-years • W-2 & 1099 Statements for past 2-years
Documents needed for FHA loan
• Pay-Check Stubs for the past 2-months • Self-Employed Income Tax Returns and YTD Profit & Loss Statements for the past 3-years for self-employed borrowers Savings • Complete bank statements for all accounts for the past 3-months • Recent account statements for retirement, 401k, Mutual Funds, Money Market, Stocks, etc.
Credit • Recent bills & statements indicating account numbers and minimum payments • Landlord's name, address, telephone number, or 12- months cancelled rent checks • Recent utility bills to supplement thin credit • Bankruptcy & Discharge Papers if applicable • 12-months cancelled checks written by someone you co-signed for to get a mortgage, car, or credit card, this indicates that you are not the one making the payments. Personal • Drivers License • Social Security Card • Any Divorce, Palimony Alimony or Child Support papers • Green Card or Work Permit if applicable • Any homeownership papers Refinancing or Own Rental Property • Note & Deed from any Current Loan • Property Tax Bill • Hazard Homeowners Insurance Policy • A Payment Coupon for Current Mortgage • Rental Agreements for a Multi-Unit Property
Your monthly costs should not exceed 29% of your gross monthly income for an FHA Loan. Total housing costs often lumped together are referred to as PITI. P = Principal I = Interest T = Taxes I = Insurance
What can I afford?
Examples: Monthly Income x .29 = Maximum PITI $3,000 x .29 = $870 Maximum PITI Your total monthly costs, or debt to income (DTI) adding PITI and long-term debt like car loans or credit cards, should not exceed 41% of your gross monthly income. Monthly Income x .41 = Maximum Total Monthly Costs $3,000 x .41 = $1230 $1,230 total - $870 PITI = $360 Allowed for Monthly Long Term Debt FHA Loan ratios are more lenient than a typical conventional loan.
Bankruptcy and FHA loans
Yes, generally a bankruptcy won’t preclude a borrower from obtaining an FHA Loan. Ideally, a borrower should have reestablished their credit with a minimum of two credit accounts such as a car loan, or credit card. Then wait two years since the discharge of a Chapter 7 bankruptcy, or have a minimum of one year of repayment for a Chapter 13 (the borrower must seek the permission of the courts). Also, the borrower should not have any credit issues like late payments, collections, or credit charge-offs since the bankruptcy. Special exceptions can be made if a borrower has suffered through extenuating circumstances like surviving a serious medical condition and had to declare bankruptcy because the high medical bills couldn't be paid.
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