Articles From Experts
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Express Newsline Articles From Experts |
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You are a first time homebuyer. And you are thinking of one of the better-best options available to you for mortgage. Either you have a shortage of down payment funds. Well, FHA loans are the best options you have available to you. As compared to many other higher conventional loans, you can mortgage a house for as little as 3% down with FHA loans. The FHA does not make home loans--it insures them. If a homebuyer defaults, the lender is paid from the insurance fund. So, what gets you to qualify for FHA loan? --To obtain an FHA loan, you must have a credit background that shows you meet your obligations. --You must have enough income to pay your monthly debt, as per their guidelines. --You must have enough cash to make a down payment at the time of closing. --You must be able to pay the closing costs, which normally total 2-3% of the price of the home. These costs might include homeowner's insurance, attorney's fees, fees for a title search and title insurance, Private Mortgage Insurance if you are paying less than 20% down, the loan origination fee, and a fee that goes into the FHA insurance fund. You might also be paying 'points,' to the lender. Each point equals 1% of the cost of the home. Sometimes a seller will agree to pay your points, and sometimes points can be financed. How Much FHA Loan Can You Afford? For an FHA loan, your monthly housing costs should not exceed 29% of your gross monthly income. Total housing costs include mortgage principal and interest, property taxes, and insurance. Those four terms are often lumped together, and referred to as PITI. Example Monthly income X .29 = Maximum PITI For a monthly income of $3,000, that means Your total monthly costs, adding PITI and long term debt, should be no more than 41% of your gross monthly income. Long term debt includes such things as car loans and credit card balances. Example Monthly income x .41 = Maximum Total Monthly Costs For a monthly income of $3,000, that means $1,230 total - $870 PITI = $360 allowed for monthly long term debt The ratios for an FHA loan are more lenient than for a typical conventional loan. For conventional home loans, PITI expense cannot usually exceed 26-28% of your gross monthly income, and total expense should be no more than 33-36%.
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