Reach out to Elite Mortgage Source in Cape Coral to help assist you with your FHA loan process.
What you need to know
Future income used to be allowed with FHA, meaning that you could purchase a home with a job offer and not be working there yet. However, with COVID most lenders are not allowing that, they want to see you at work. Normally enough to collect any way anywhere between two to four weeks worth of pay stubs, to be able to qualify for a FHA loan.
Now dumping and closing costs. This is one of the biggest things that we need to talk about here with FHA. So the minimum down payment is 3.5%. And the down payment is actually tied to the credit score. You’re allowed to use collateralized loans. So something like a 401k loan or a home equity loan to be able to qualify for the down payment and closing costs here, however you can’t use unsecured loans, right? I can’t use a credit card. That’s not something I can’t just go and use a credit card for my down payment or closing costs. That’s not allowed.
I can’t use a personal loan for down payment or closing costs. However I can use a family member alone that can be either secured or unsecured, meaning they can either have a claim to the property or no claims to the property with that type of loan from a family member. Also, we could get a gift from a family member to go towards our closing costs or down payment. If we need some help.
There are also local down payment assistance programs and national down payment assistance programs where you’re going to get help to pay for your down payment or some of your closing costs. The issue here is that they can be costly. I rarely have ever seen a down payment assistance program that is more beneficial for a buyer than if the fund the loan themselves, paying their own down payment, their own closing costs on their own.
You want to shop around to find a lender that will help you out there. So if you have a 500 score up to a 579, you’re going to need to put 10%. Okay. And if you have a 580 plus, then you can do 3.5% down.
If we’re talking about conventional FHA, USDA, VA, it’s one of the most lenient types of those loans and it tends to be best for scores 680 and up. So technically you could qualify for a conventional loan. If you have a 620 score, or what I’ve found is even if you can qualify conventional, if you have below a 680 FHA is probably going to be a better loan for you short term, then you can build your credit score and refinance into a conventional loan.
Normally, that’s going to give you the best mix, the best loan strategy moving forward instead of just holding onto an FHA for a long period of time or. A conventional loan with a minimum, minimum, middle credit score. And it’s going to cost you a lot of money because you’re going to penalize with the interest rate.
So credit. So FEG loans are more forgiving on revolt, revolving and installment lates. Okay. They normally let you have around two lates within the past 12 months on revolving accounts and normally one installment late within the past 12 months. Ideally you would have none, but FHA can be a little bit more lenient.
Also as far as non-medical collections greater than $2,000 total, again, this is non-medical. You either need to have one of these three remedies, either a payment plan. It needs to be paid off, or 5% of the balance is going to be calculated in your debt to income ratio. And this is going to shrink how much you can qualify for with the loan.
Contact Don Vuncannon at Elite Mortgage Source for help with your Cape Coral FHA loan.
