Planning to Apply for an FHA Loan? Read this First!

The FHA is a mortgage loan program that is administered by the Federal Housing Administration. If you live in and around Texas, buying a home may not be a challenge; thanks to the thriving housing market of the state, and affordable home loans in Texas make living here an attractive proposition. Home loan options such as FHA have become popular among the homebuyers due to their low down payment requirement, attractive interest rates, and flexible lending regulations. If you are a first-time home buyer in Texas, an FHA loan is worth considering. However, before you apply for an FHA loan, it is essential to have some basic understanding about this financing option. On that note, let’s take a look at the finer lines of FHA home loans in Texas. 

 

Low Down Payment

One of the most attractive features of an FHA loan is that it requires just 3.5 percent down payment of the purchase price of a property. This percentage can be as high as 20 percent in the case of conventional loans. FHA borrowers have the flexibility make the down payment through gifts from family members towards the purchase of the house. Other allowed sources are grants from the state or local government down-payment assistance program.

Lenient Credit Score Requirement

People with less than adequate credit scores may qualify for an FHA loan. An FHA loan applicant, for instance, needs a credit score of 600 or more to get a mortgage with down payment as low as 3.5 percent. You need to make a minimum down payment of 10 percent if your credit score is below 600. The Federal Housing Administration allows prospective homebuyers, who have “non-traditional credit history or insufficient credit” to apply for this loan under specific circumstances. It is ideal to seek the help of a specialty mortgage firm to find out if you qualify for an FHA loan.

Closing Costs Included

If you fulfill loan-to-value (LTV) maximum guidelines, you will be able to finance a part of closing costs associated with FHA loans. You can roll out a specified amount of closing costs into your new FHA mortgage loan if your loan along with closing costs don’t exceed 96.5 percent of the fair market value (FMV) or selling price of the home; whichever is less. FHA closing costs are just like the expenses that borrowers incur on other mortgage loans. These closing costs include points, recording, title examination, title policy, and legal fees.

Debt-to-Income Ratio

If you are one of those FHA loan applicants with a high debt-to-income ratio, you may still qualify for this loan. You should, however, provide evidence that you can afford to make monthly payments. The FHA is more flexible with debt-to-income ratio limits as compared to other loans. The maximum limit of mortgage payment-to-income ratio is 29 percent while the total fixed payment-to-income ratio has a maximum limit of 41 percent.

Two-Part Mortgage Insurance

FHA loans need you to pay for two mortgage insurance premiums. The first is the upfront premium, which is 1.75 percent of the amount of the loan. This premium is often rolled into the loan amount to be paid by the lender. The second is the annual premium that you need to pay along with your monthly loan repayments. In this context, it is worth mentioning that the last FHA annual MIP rate was updated to 0.85 percent in January of 2015.

Conclusion

Now that you know almost everything about FHA loans, it is the time that you fulfill your homeownership dream. If you are looking for home loans in Texas, but utterly confused about the application process, consult a reputed mortgage consultant. A specialty mortgage consulting firm can guide you through the application process and help you secure an FHA mortgage loan seamlessly. Before applying, ask as many questions as possible to clear all your doubts.

Home Loan Available in Texas for Veterans and Service members

Veterans and servicemembers living in Texas have plenty of options, when it comes to financing a home purchase. According to the data released by US Census Bureau in 2014, there were approximately 1.5 million veterans in Texas, making it the state with the second highest veteran population in the US. This blog discusses three most-used home loan programs available in Texas for those who risk it all, for the greater good. Let’s take a closer look.

Veteran Housing Assistance Program

This loan program by Texas Veterans Land Board (VLB) is designed to assist state veterans in buying home at a low-interest rate. A veteran, however, needs to meet the eligibility criteria, before applying for the VLB loan. A veteran needs to be an active duty member, in the reserves for a specific qualifying time period for retirement or a member of the Texas National Guard to quality for VLB loan. Veterans who serve for at least 90 active duty days qualify for the loan program.

Multifamily units, single-family home, condominium and townhome in Texas qualify for the loan program. A veteran doesn't need to make a down payment, but it is necessary to show that the applicant has a primary residence in Texas and plans to stay in the new home for a period of three years or more.

Land Loan

A veteran, who wishes to build a house can apply for a land loan program. It gives enough flexibility to build a custom home that meets the accessibility needs of the disabled or injured individuals. A veteran needs to look at the available residential acreage in Texas and apply for a loan amount to purchase the land. A separate VA loan, in addition to the land loan, could be applied for to construct the house.

VA Financing

VA loan, introduced by the U.S. Department of Veterans Affairs, is the last home financing option for veterans. The applicant doesn't need to be a resident of Texas to avail the loan. VA home loan has a low-interest rate and a veteran doesn't need to make down payment at the initial stage. Whether a veteran needs to buy or build a house, VA loan is a great option. A veteran can also apply for a VA loan to install energy efficient lights and water heating system in the house. It is essential for a veteran to qualify the eligibility criteria to get approval for any of the three above discussed programs. Seeking the advice of a VA loan specialist often speed-up the process and makes it hassle-free for the applicant.

FHA Loans: All You Need to Know

The Federal Housing Authority backed mortgage, also known as FHA loans make home-ownership an achievable dream for many first-time homebuyers – thanks to flexible borrower requirements. Compared to conventional loans, FHA loans are easier to obtain due to many reasons, such as a low down payment of only 3.5 percent, and a low credit score. Despite it being an easy financing option, not everyone qualifies for FHA loans as there are few criticalities involved. In this article, we discuss these all the aspects of FHA loans. Let’s start.

FHA Loans: Mortgage for Primary Residence

Federal Housing Authority doesn’t directly provide FHA loans to people. Borrowers get this loan from  FHA-affiliated lenders, and FHA’s task is to insure the loan. There are numerous FHA loan lenders in Texas, Virginia and other states who provide these loans based upon a uniform set of  guidelines set-up by the FHA. The FHA, however, provides flexibility to lenders in setting standards for determining basic requirements and loan eligibility.

FHA loans are financed only for borrower’s principal residence that needs to be owner-occupied. This loan may not be utilized for rental properties or any other form of investment. Other properties eligible for FHA loan includes: townhouses, row houses, detached and semi-detached houses.

Maximum Loan Amount

The maximum loan amount a borrower can receive with FHA loan program depends on two factors:

1.      The statutory limit for the geographical area where the property is located.

2.      The loan-to-value ratio for the specific property.

Though, with all these factors in hand, in most areas loan limit is $271,050; however, in costly areas such as Alaska and Hawaii it goes up to $625,550.

Credit Score Requirement

A minimum credit score requirement for getting any conventional loan is 620, however, a credit score of 500 works for FHA loans. It means that people with poor credit score may easily qualify for FHA loan programs. Though, a borrower may be disqualified from availing this loan scheme in certain situations such as if he fails to make timely payment of bills or any other dues.

Employment and Income Requirements

Borrowers with basic eligibility criteria of stable employment and income are eligible for FHA loan program. Usually, lenders like to see two years of steady employment history and lenders also expect borrowers to continue the job for at least next three years after obtaining the loan.

Conclusion

Keeping these factors in mind you can see that the FHA loan program is much more flexible than any other conventional loan programs. Therefore, if you are facing financial crunches, but still have a dream to own a home, the FHA loan program is the right way to go.

VA Loans Eligibility Criteria: Do You Qualify the Maze?

When it comes to the qualification criteria of traditional loans, veterans and other military service members are at a disadvantage due to the nature of their jobs. As they are often transferred from one place to another, it is difficult for their family members to get a steady job at one place -- leading to fluctuations in their credit score. To help them get a home of their own, the Department of Veteran Affairs, started VA loan program. These government backed loans offer equal opportunity to all qualified veterans to obtain finance for their primary residence. This brief read discusses four key essential elements required for VA loan approval.

Eligibility

To get approved of a VA loan, the borrowers must satisfy at least on the following requirements:

●       Veterans who have served during the WWII for required period

●       Service members who are currently on duty and fulfil minimum active duty service requirement

●       Certain Reservists and National Guard Members

●       Surviving spouses of deceased veterans

Property Entitlement

According to guidelines stipulated under VA loan, the benefit of the loan can be availed only for owner-occupied properties. The list of property eligible for VA financing include:

●       Single-family homes

●       VA-approved condos

●       Townhouses

●       Multi Family homes

In addition to this, VA also includes financing for modular homes if they are used as permanent residents; however, not all lenders offer VA loan for them.

Owner Occupancy

According to law, VA borrowers must occupy the property, for which they have applied for a loan. VA borrower is required to give in written the proof that they will occupy the home within a reasonable time. The time flexibility given to borrower is within 60 days of closing. Borrowers deployed far from the place are given the extension of 12 months. In the absence of borrower, the only spouse is eligible to satisfy the occupancy requirement in a VA-eligible borrower’s stead. Borrowers qualify for refinance loans only when they have occupied the home in the past.

Income & Credit

Though there is no fixed credit score limit stipulated under VA loan, the lenders are given some flexibility to decide whether a borrower is a safe lending prospect within VA guidelines. The VA, however, recommends borrowers have no more than 41% debt-to-income ratio and sufficient residential income to sustain living expenses. Having said that, refinancing in VA loan doesn’t require income and credit re-qualifying.

Conclusion

As bankers are tightening their lending standards, the market has witnessed a surge in demand for VA loans. To qualify for a VA loan, the borrower must have sufficient income, suitable credit and a valid certificate of eligibility. Once approved the loan amount may vary depending on borrower’s entitlement and ability to pay.