FHA Mortgage Loans in Texas

An FHA mortgage loan is a popular program for first time home buyers and those seeking a lower down payment option. An FHA loan is backed by the Federal Housing Administration against default, meaning if the loan doesn’t get paid by the borrower, the FHA pays the lender making it an attractive program for mortgage lenders. There are several available mortgage loan options through the FHA program.

How Do I Qualify For An FHA Loan?

To qualify for an FHA loan, there are certain requirements from the FHA and there may be additional requirements from the lender. The basic qualifying factors are related to income stability, debt to income ratio, credit history and the amount of the loan verses income.

FHA Loan Income Requirements:

An FHA loan will require a two year income history. The lender will want to see a steady income for two years that either stays consistent or increases. The best scenario would be with the same employer. Also, an FHA lender will suggest that you calculate your mortgage payment, mortgage insurance, property taxes, hazard insurance and HOA payments (also known as PITI which is all that rolled into one) to 29% of your gross income. In some cases you can stretch this to 35% of your income if needed.

FHA Debt to Income Ratio Requirements:

No matter what kind of mortgage loan you get, debt to income ratio will be considered before you are approved. An FHA loan generally offers more room in a debt to income ratio than other traditional home loans. There are two ways to calculate your debt to income ratio, the front end and the back end.

The front end ratio is your income divided by your PITI mortgage payment. You will want to keep this at or below the standard of 29%.

The back end ratio is you minimum monthly payments for your outstanding debts that are not considered “living expenses” such as car insurance, utility bills and health insurance. Any auto, student, personal and credit card expenses will be calculated as well as child support, alimony and federal tax lien repayments. The only way it will not be calculated is if you have less than 9 months to pay off the bill entirely.

The maximum allowed to spend by the FHA is 41% of your entire gross monthly income, including mortgage PITI payments and back end debts to be approved.

FHA Loan Credit Requirements:

In order to be eligible for an FHA loan, most lenders will require a middle score of 620 or higher, though the minimum score allowed by the FHA is 580. The FHA looks more at your 2 year credit history than anything else when approving a home loan. If you do not have a FICO score at all, you should still be able to apply for an FHA loan. There are some basic rules that the FHA requires on a credit report. First, you should have no more than two past 30 day lates on your credit in the past two years. If you have a bankruptcy it must be a minimum of two years old and your credit must be in perfect standing after. If you have a foreclosure, it must be a minimum of three years old and your credit must be in perfect standing after.

FHA Loan Down Payment:

If you are looking for a low down payment, an FHA loan is one of the best programs available, requiring a minimum of 3.5%. The best part of an FHA loan down payment, is that the funds can be a “gift” rather than showing in your checking/savings account for at least 3 months like other types of mortgage loans.

FHA Loan Property Restrictions:

FHA loans do have certain restrictions in loan amount and property type. The maximum loan amount available for an FHA loan depends on your area. You can research this by going to the HUD website. Also FHA only allows for single-family residences and approved condos.

FHA Lender in Midland and Odessa, Texas

Venta Mortgage is an FHA lender in Midland,  and serves all of Southwestern Texas, including Odessa and Midland County. If you would like to take advantage of getting an FHA loan, we can help provide you with guidance throughout the process. Feel free to contact your Venta Mortgage, your Midland Mortgage Company today.