In order to qualify for a FHA loan, you cannot have any substantial employment gaps. If you were laid off from work for 1 month or more, please do not apply as we cannot approve you.

You must have some types of established credit in to be approved for a FHA mortgage. A FHA home loan requires that you either have 2 open trade lines on your credit report or you have alternate trade lines like utility bills, cable bills, or phone bills.

You can be approved for a FHA mortgage if you filed bankruptcy in the past. The requirements are as follows:
If a Chapter 7 bankruptcy was filed, it must have been discharged 2 years or more previous to your loan application and you must have re-established your credit and all re-established credit must be paid as agreed since the bankruptcy.
If a Chapter 13 bankruptcy was filed you must show at least 1 year paying as ordered by the bankruptcy court. The new FHA mortgage loan transaction must be approved by the bankruptcy court.

Gifts for the down payment and/or closing costs may come from family members, close friends, your employer or labor union, a charitable institution, or a governmental agency or public entity that has a FHA accepted homeownership assistance program.
100% of the funds for down payment and all closing expenses may come from an acceptable gift or grant program. These funds must be THOROUGHLY documented to show that no repayment is expected and the gift donor(s) will NOT place a lien against the subject property.

In a purchase transaction, a seller can contribute up to 6% of the closing costs for a buyer.

All FHA loans are full documentation meaning that you will have to prove that you earn enough income to support the loan. The required debt to income ratios are
31% of your income can be used for your mortgage payment (including your taxes & insurance)
43% of your income can be used for your mortgage payment (including your taxes & insurance) plus any other monthly liabilities like a car payment, credit card minimums, or any other liability appearing on your credit report.

For Example:
If you are borrowing $200,000 at 7% interest, your monthly mortgage payment would be $1330 for principal and interest. If your property taxes were $100 per month and your homeowners insurance were $100 per month your total monthly mortgage payment would be $1530 per month. Your household would have to earn at least $4,935 gross per month or $59,225 gross per year in order to qualify on with a 31% debt to income ratio. This assumes that you have no other monthly liabilities or debt.

If you are borrowing $200,000 at 7% interest, your monthly mortgage payment would be $1,330 for principal and interest. If your property taxes were $100 per month and your homeowners insurance were $100 per month your total monthly mortgage payment would be $1,530 per month. Your household would have to earn $4,935 gross per month or $59,225 gross per year in order to qualify on with a 31% debt to income ratio. If you had some additional liabilities they would need to be added to your mortgage payment and compared to your income using the 43% back end debt to income ratio. Let's say you have a $200 per month car lease and $100 per month in monthly credit card minimum payments. That would bring your total monthly liabilities to $1830. Your household would have to earn $4,255 per month or $51,069 gross per year in order to qualify with a 43% back end ratio.

Another way to look at it is from a prospective of how much mortgage you can afford per month based on your income. For example if you make $60,000 per year ($5,000 per month), you can qualify for a mortgage with a total monthly payment of $1,550 per month as long as your total monthly payments including your mortgage, taxes, insurance and other debt doesn't exceed $2,150 per month.

Previous Foreclosure

You cannot qualify for our FHA mortgage if you had a foreclosure within the past 3 years.

Collections

FHA does NOT arbitrarily require that all collections be paid off prior to closing.
Collections are evaluated on a case-by-case basis. We have established a policy that collection accounts will be paid off at our underwriter’s discretion. You MUST explain in writing all collection accounts and judgments.

All open judgments must be paid in full and satisfied prior to closing. Proof of the satisfaction of the account(s) must be provided.

We require the most recent 3 months statements for all assets. All large deposits must be documented as to the source of funds.

- Upfront Mortgage Insurance (UFMIP) is a one time mortgage insurance premium collected at closing and sent to HUD to insure your loan. UFMIP is calculated at 1.5% of the base loan amount. UFMIP will be financed in the mortgage amount.
- Annual Premium (Monthly Mortgage Insurance): In addition to the UFMIP, monthly mortgage insurance will be charged by HUD.

The following conditions will require an automatic inspection, include but are not limited to:
• Standing water against foundation and/or excessively damp basements
• Hazardous materials on the site or within the improvements.
• Faulty or defective mechanical systems (electrical, plumbing, or heating)
• Evidence of possible structural failure

All FHA loans are assumable, subject to prior credit approval for the party assuming the loan.

No prepayment penalty

3 months liquid reserves are required on 3-4 family property purchases (and no gifts allowed)

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