Did you know the Federal Housing Administration insures the FHA loan and a lender issues it? Many borrowers have a misconception that the FHA offers them the mortgage. Of course, you need to follow the eligibility requirements laid out by the lender and FHA. This is the most popular house loan in Houston; unfortunately, many dig in without acquiring adequate knowledge.
For enjoying the loan benefits, you should hire the best FHA lenders in Houston. As this is your first time in the home buying process, numerous questions might be swarming in your mind. Before committing to the mortgage, know with whom you are going to work. Not every lender in the market is approved by the FHA. Most importantly, the lender must have worked previously with other FHA borrowers. Shopping around for an FHA lender is a wise way to start things off. However, you should know the answers to a few questions before jumping ahead. Go through the rest of the article to know more.
Can you pass the FHA loan requirements?
You must have heard that the FHA loans have relaxed guidelines. But did you know the process can turn out to be stringent? If you find a lender and then fail to meet the standards, there would not be a bright side to look at. For qualifying the FHA loans, you need to meet the following requirements,
10% down payment when the credit score is between 500 and 570
3.5% down payment when the credit score is 580 and above
Purchase the loan for a primary residence
Debt-to-income ratio of less than 43% or 50%
No history of foreclosure in the last 3 years
Minimum of two years of working history
FHA loans have relatively lower interest rates. Remember, the requirement according to the lenders. However, most of them generally follow the one mentioned above.
What are all the costs?
Ask the lender about lender fees and other charges, including appraisals, title policy, escrow, pest inspection reports, and credit reports. With an estimation of the fees, you can fix the budget accordingly. Many borrowers end up being a victim of hidden charges. So, ask the lender to inform you about possible fees beforehand. This can save you from unpleasant surprises regarding closing costs.
Shall I change my spending habits?
Since the lenders review your credit score and they design the credit score requirements, this is something you should consider. Not changing their spending habits is often a common mistake. Low- or average-income holders rely on FHA loans. Therefore, the credit issue remains a problem for many. You should stop yourself from making a big purchase right before buying the loan. This will leave an impact on the debt-to-income ratio. Also, keep your credit score in check. Start paying your bills on time, and keep the financial picture steady.
In the end, find a lender who can advise you on every front. Also, make sure the lender has met the HUD guidelines to be a professional one.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.