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FHA Approved Lenders
One of the best decisions you can make when selecting a lender in New York is to choose one that’s FHA-approved. Why? Well, for starters, approved lenders have access to both conventional and Gov backed mortgages, so they can present you with a full range of options.
The FHA Advantage
- You can qualify with a credit score as low as 550.
- You can buy a home with a down payment as low as 3.5% or No Money Down with help from a HUD approved grant program.
- You can qualify even if you’ve had credit difficulties in the past, like a bankruptcy.
- You can finance your closing costs into your loan.
1. Protection For You
Approved lenders must meet strict requirements which gives you added protection.
For instance: Approved lenders must be valid corporations with a minimum net worth so fly-by-night operations won’t qualify. There must be a managing officer with at least three years of experience in the mortgage field the company operates in. No one in the organization may have a loan license suspension or debarment. They must not have been indicted or convicted of any offense that reflects adversely upon their “integrity, competence or fitness…” There are many other requirements that serve to protect you, the borrower, as well as the FHA itself. Approved Lenders Offer More Options.
Buying a home is the fulfillment of a dream for many people. But some are disappointed to discover they don’t qualify for home loans under conventional lending requirements. They may not have enough cash for a large down payment. Or, they have less-than-perfect credit. For some, the strict debt-to-income ratio requirements put a conventional loan out of reach. They come away disillusioned and discouraged. But for those people, an FHA loan could be the answer. If they’re working with an approved lender, a new realm of possibilities can open up.
2. Low Down Payment
Low Down Payment. Not everyone has the piles of cash conventional lenders ask for their down payments. FHA has solved that problem for millions of buyers. With an FHA-insured loan, your down payment can be as low as 3.5 percent.
That difference can be the deciding factor when you’re looking to get into your dream home. For a $500,000 home, even a relatively low down payment of 5 percent comes out to $25,0000 is way beyond the reach of many buyers. But with an FHA loan your down 3.5 percent down payment would only be $17,500, a difference of $7,500! That’s enough to make or break the deal in many cases.
3. Leniant Credit Requirements
Lenient Credit Requirements. FHA loans are tailor-made for people who don’t have perfect credit. lenders can be more lenient because the loans are backed by the federal government.
Conventional lenders prefer borrowers with credit scores above 700. By contrast, you may qualify for an FHA loan with a score of 620 or even lower in some cases.
4. Higher Debt to Income Ratios Okay
Debt-to-Income Ratio. A critical part of the loan approval process is calculating your debt-to-income (DTI) ratio. That’s the percentage of your monthly income that goes to debt repayment. (Your front-end DTI is calculated using only your mortgage payment; the back-end DTI includes all your monthly debt payments.)
Here too, guidelines can be more forgiving than those for conventional loans. For instance, conventional loan guidelines typically cap the front-end DTI at 28 percent. But under FHA guidelines you may qualify with a DTI of 30 percent.
That means if your monthly gross income is $5,000, you’d be limited to a monthly payment of $1,400 with a conventional loan. But with an FHA loan, your allowed monthly payment could be as high as $1,500. That allows you to buy a bigger, better house.
Likewise, your back-end DTI is typically limited to 36 percent with a conventional loan. With FHA, it can be as high as 41 percent.
5. Low Interest Rates
Competitive Rates. Even though these loans have more generous guidelines for eligibility, the interest rates are quite competitive. Find out and compare!
6. Low Closing Costs
Lower Closing Costs. FHA has very strict guidelines about the closing costs you pay as a buyer. The costs that don’t fall within their guidelines must be paid by someone else! That usually means the seller, the lender or even the real estate agent. That saves you money as a buyer.
Conventional mortgages often cap the amount a seller can contribute to closing costs at $3,000. But an FHA loan allows you to receive $6,000 in closing cost help.
FHA Loan Requirements
Here’s what you’ll need to qualify for an FHA Home loan:
- A minimum credit score of 550
- No more than two thirty-day late entries on your credit report
- Monthly payments not to exceed 30% of your gross monthly income
- 3.5% of property sale price in down payment or utilize a grant to pay the down payment.
- Back-end debt-to-income ratio up to 50%
- Consistent employment over the past two years
Working with an approved FHA lender is always a wise choice. Whether you eventually go conventional or FHA, an approved lender can give you all the options.
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