In 1934, the Department of Housing and Urban Development created the Federal Housing Administration, or FHA, to help get the economy going again. Today, that same FHA loan program is helping Houston area residents buy their first home with very little down. And even though the FHA loan isn't just for first time home buyers, the program has some a couple of little-known guidelines assisting "first-timers."
Compared to conventional loan programs, the government-backed FHA loan requires a down payment of only 3.5 percent. For a $200,000 sales price, that's $7,000. Conventional loans typically ask for a minimum of 5.00 percent down along with a hefty private mortgage insurance premium, known as PMI. Conventional loans with 5.00 percent down have higher rates compared to loans with 20 percent down. The PMI payment plus higher rates can be prohibitive, keeping many out of the home buying loop. Yet the FHA loan does not penalize a borrower with a small down payment.
And speaking of a down payment, FHA loans allow a family member or non-profit to give the entire 3.5 percent down payment as a gift. All the FHA borrower need have is at least $500 in the transaction. Conventional loans allow for gifts, but the borrower must have a minimum of 5.00 percent of their own funds as a down payment.
Perhaps the best FHA feature? FHA allows for a co-borrower that will not live in the home being purchased to help qualify based upon income. As long as the co-borrower can afford the new FHA house payment along with their current debt, the FHA borrower need only occupy the property, even if the borrower is temporarily unemployed and looking for work!
There are a variety of unique FHA approval guidelines that only an experienced FHA lender will recognize. If you're a first time home buyer, and even if your next home is your second or third; if you want a low down payment loan to buy a Houston area home, call us. An FHA loan just might be your best option.
To be qualified, your income ration should be 31/49, means, your mortgage payment should not be more than 31% of your income and your total debt ( Mortgage and existing ) should not be more than 49% of your income. This should give you an idea for how much your will be qualified for.