FHA Loan to Help Homebuyers

Easy Loan Approval with an FHA Loan

One of the most popular loan programs for Tennessee home buyers is the FHA loan program.  It is so popular due to relaxed guidelines when compared to conventional guidelines.

FHA is the Federal Government’s answer to Private Mortgage Insurance or PMI.  FHA does not make loans; instead they insure the loan, therefore eliminating much of the risk from the lender if the borrower should default on the loan.  If that did happen, the lender would make a claim against the FHA insurance on the loan to recover their losses.

Below are some of the elements that allow the FHA loan program to enable many Tennessee homebuyers to realize their dream of owning a home.

Credit:

The media is full of commentary stating that one must have perfect credit in order to obtain a home loan in today’s market.  This is not true.  Typically one only needs to have a middle credit score of 640 or higher in order to meet the FHA credit score requirements.  Actually the minimum score set by FHA is much lower, but the lenders that make the FHA loans require the higher minimum score of 640.

FHA is also more forgiving and understanding of past credit issues for Tennessee home buyers.  Items such as bankruptcy or foreclosures which would prevent one from obtaining a conventional loan for up to seven years can be overcome in as little as 1 year for an FHA loan.

  • Chapter 13 Bankruptcy-1 year since file date (actually can get approved while still in bankruptcy)
  • Chapter 7 Bankruptcy-2 years following discharge
  • Short Sale- No waiting period in some circumstances (no late payments and the sale made due to borrower moving from the area for a work related move.
  • Foreclosure- 3 years

You can also overcome other credit issues that did not result in bankruptcy or foreclosure  in as little as 12-24 months  if you have re-established  a good credit  history.

Employment

Employment in the same field or same line of work is needed to qualify.  However, it is not required that you have the same job just that you are in the same or related field.  There are also exceptions in cases where you were able to move into a better field.

If you have been in school in the last 2 years, graduated and are employed in your field of study, then the time in school can be considered as “time on the job” and be used to satisfy the 2 year requirement.

Debt to income ratio:

Debt to Income, often referred to as DTI,  is related to your employment history.  While a consideration of your employment history will determine how much of your income can be used to qualify for a FHA loan, the DTI will use that number to make sure you can afford the monthly payment.

The old standard guidelines  for Tennessee FHA loans were 29/41 although that has been recently increased to 31/43.

This means that the total mortgage payment (principle, interest, taxes and insurances) should not be more than 31% of your gross monthly income, and that your mortgage payment AND all other monthly debt payments  (this does not include utilities such as lights, phone, cable ect..) not exceed 43% of your gross monthly income.

Although the guidelines state that maximum DTI in Tennessee  is 43%, it is possible and is common to see loans get approved with DTI of 55%

Down Payment

One of the biggest hurdles to Tennessee home buyers  is saving up for the  down payment.  Most conventional or bank loans require a larger down payment and mandate that the money come from your own funds.

FHA is beneficial because it only requires you to have a 3.5% down payment, and FHA allows the entire amount of the down payment to be given to you as a gift by a family member.  None of the down payment is required to come from your savings.

Parents, Grandparents even employers are allowed to give you a gift for the down payment.

Get Fully Pre Approved

I specialize in Government loans and love the flexibility offered by the FHA guidelines in helping Tennessee buyers like you purchase their new home .

Call me today at 865-686-8711 and I will help you get pre-approved for the purchase of your new home.


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