The simple FHA loan requirements Houston which most first time homebuyers can fulfill
One of the most popular home loans are without a doubt the government backed Federal Housing Administration (FHA) loans which allow first time homebuyers to buy a new home and also homeowners to change their existing homes. The houses are quite expensive in urban populated cities such as the city of Houston and a person with moderate income has to look for affordable mortgage loans, which can help him to finance the purchase of the house.
The thing which makes the FHA loan different and most sought after is its simple and lenient loan terms as compared to other conventional home loans offered by banks. The FHA loan requirements Houston are very popular among the first time homebuyers who have less than perfect credit score, high debt ratio and who cannot afford to make large down payments or pay high interest rates. The purpose of the FHA loans was not only to make buying a house affordable but also to reduce the number of foreclosures and remove the financial risk of mortgage lenders.
The FHA loans are guaranteed by the government, which means the government will cover the financial loss of the mortgage lenders if the homebuyer fails to pay the monthly mortgage payments and default on the loan amount. The best thing of FHA loans is that it allows homebuyers with poor or bad credit score to even qualify for the loans. A credit score is the main factor that decides the acceptance of loan application. The credit score is categorized by FICO (Fair Isaac Corporation) as
- 800 to 850- Excellent score
- 740 to 799- Very Good score
- 670 to 739- Good score
- 580 to 669- Poor score
- 300 to 579- Bad score
The FHA loan requirements Houston is different for home buyers according to their credit scores. The FHA lenders ask for
- A 5% down payment on a poor credit score of 580 or below
- A 10% down payment on a bad credit score 579-500
- A low debt to income ratio of less than 43% but up to 50% debt to income ratio is accepted
The other necessary factors which are included in FHA loan requirements Houston is
- The homebuyer must have stead and stable employment for more than 2 years
- Have a high monthly income
- The borrowers must have a lawful Social Security Number, and of legal age to sign the mortgage application
- Must have no outstanding debt to pay
