An underwriter must analyze the four basis pilars of risk (followin guidelines pre-established by FHA and of the other agencies): 1) Credit 2)Income/Employment 3)Assets and 4) Collateral.
What concrerns you as a buyer is the how, the way they "think" or review your loan, is goin to affect the decisions you take:
1) Credit: While FHA establishes a bottom of 500 credit score, most lenders do not take that level of risk, and determine a minimum of 620. Some other lenders have a 640 minimum; and two or three in within the industry, are still willing to go down to 580.
2) Income/Employment: The most important aspect is the proportion of the income vs your liabilities, and that is what will determine your capacity of purchase. Also, the consistency of the income, and the stability and lenght of employment. However, employment is not the only source of income, you could use also other avenues: Retirement Income Annuities, Pasive Income, etc.
3) Assets: Must be seasoned, and there must be a reasonability of assets in relation with the income.
4) Collateral: What type of occupancy (only primary for FHA Purchase), and What type of property is what is going to determine your decisions. A condominium for instance, will not be much of an option. To finance condominiums utilizing an FHA financing, the project must be an approved FHA Condo. Lately, most condominiums have an expired approval. Some lenders can do a review, acting as a direct endorsment in behalf of HUD.
Also, as some others mentioned, the quality of the collateral is a big determining factor. On properties that have an association (even thou, not necesarily condos) sometimes they have some restrictions (such as the first right of refusal) that violate some of the requisites of FHA Financing (HMDA, and EQUOA).
The Andre Shambley Group
There is the FHA 203k streamline mortgage if the house has "issues" that the seller cannot afford to repair before closing. What it does is allows a buyer to include the cost of the repairs in the mortgage and they are done after closing.
All the best,
Funds used to cover the required minimum downpayment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented.â€
â€¢ federal income tax returns for the most recent two years, both individual and business, including all applicable schedules, for self-employed borrowers,
â€¢ individual federal tax returns for commissioned individuals. â€
â€œThe relationship of total obligations to income is considered acceptable if the total mortgage payment and all recurring monthly obligations do not exceed 43% of the gross effective income.
When the decision credit score is:
â€¢ 580 and above: Maximum financing
â€¢ 500-579: Maximum LTV 90.00%
â€¢ 499 and below: Not eligible for FHA insured financing
A transaction where one borrower has only â€œnontraditional creditâ€ and the other has a decision credit score of less than 500 would also be ineligible.â€
borrowers who do not meet the bankâ€™s minimum credit requirements (often a FICO score of 620 or higher) may be denied a loan even though they technically meet the FHA minimum credit score. Borrowers who have concerns about their credit should contact the FHA to ask for a referral to a housing counselor who can offer advice on how to improve credit scores.
Myke Triebold 850-305-6256 MykeSaysSold@aol.com