Let's talk about FHA loans. Have you ever heard about FHA loans? Do you know what a FHA loan really is? Do you have an idea what it can do for YOU?
OK, so let's talk about it. I'll start by mentioning what the abbreviation "FHA" stands for because some people may ask, "What does it mean?" FHA stands for Federal Housing Administration. This administration was developed by the US Government, as a way to provide more of an opportunity for homeownership. I beleive that everyone deserves a home, and as a real estate consultant, I highly recommend the FHA loan for any ready, willing, and able buyer.
What's most appealing about the FHA loan is that it's a type of financing, "backed" or guaranteed by the government. In other words, if a borrower defaults or stops paying on his/her mortgage loan, the bank/lender is NOT and will not lose any of its money. That's because the FHA loan must come with mortgage insurance for the banks' security against past due mortgages.
Let me share that my favorite reason why the FHA loan is so valuable, is that a customer's credit rating doesn't have to be through the roof, to attain the FHA loan! This means that FHA loans are closing for borrowers with less than a 600 credit rating. Believe it or not, I know people who have closed on homes, and their score wasn't the highest (maybe a 560 or lower). The lowest a mortgage representative may be willing to work with is a credit rating of 530 or 550 for some companies. With that said, there may be exceptions that would apply, because every applicant is different, with individualized circumstances. Let's face it, pretty much everyone is feeling the financial crunch right now, and some are asking themselves if they could ever get that credit score back up to where it used to be. You should contact your local mortgage lending office to find out any additional details or exceptions which may apply to you.
FHA loans are also known for lower down payments, compared to other loan requirements. Buyers must have at least 3% money down, in addition to other closing costs. For Nassau and Suffolk counties, the loan limit for a single-family residence is $729,750, and that's a great limit for real estate in Long Island! There are a plethora of single family homes that close for well under $729, 750, especially in this type of market.
Needless to say, you have to know (or at least have a strong idea of) your credit rating. Is it "Good," "Fair," "Poor," or "Excellent" ? If you're reading this, then I hope that your credit score is Excellent. But if it's not, know this: to have a positive credit report, it's important to budget your personal and family expenses, and of course, pay those bills on time. For many of us, including myself, I know that being disciplined and timely with all of those bills can be daunting and easier said than done. However, it's key to having a sturdy credit report, so that today's lenders can work in your favor.
The last component I want to write about is your debt-to-income ratio before you are approved for that FHA loan. Generally speaking, lenders will approve a loan request if the applicant's debt-to-income is under or around 40%. In other words, if half or more than half of your monthly income is consumed by paying off credit cards, auto-loan payments, or other creditors, then your debt-to-income ratio is too high to meet the FHA loan standards. It's important to bring down that debt and keep it down for as long as you can. Just remember that the lower your household's debt-to-income ratio is, the better.
My consulting is in the interest of YOU. My compassionate service is customized to fit your needs, assessing any and all options if you are my client. My objective is quality service as a realtor. Just make sure that your mortgage representative has your interest at heart too.
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