How do FHA loans work?

JPowell · Joined: 20 Jan 2010 Posts: 103 Location: PA

My understanding of FHA loans is pretty minimal to non existent. I always saw them presented as a way for people with bad credit to become home owners, but I don't know if that's actually the purpose they are meant to serve.

I used to be one of those "bad score" people but I think I'm doing decent now considering the rebound I made. I have managed to raise my scores from the high 400s into the low to mid 600s, but I still have some old negative accounts that haven't fallen off yet.

My SO had a 700+ last we checked.

Would that put us in a good spot to consider an FHA loan?
Are there other qualifications that have to be met?
How exactly do they work/what are they intended for?

Thanks!

EricJ · Joined: 09 Jan 2009 Posts: 321 Location: New Jersey

You could benefit from an FHA loan if you need a low down payment. It may or may not be a good thing for you. Each scenario is different. Do not let someone sell you on a particular product. You need to hear all of the options and decide for yourself.

JPowell · Joined: 20 Jan 2010 Posts: 103 Location: PA

Who exactly would we go to hear all our options? I know eventually we'd have to shop around for loan rates, but I'd prefer we keep our credit check numbers as low as possible.

Do you just talk to lenders or to brokers?

EricJ · Joined: 09 Jan 2009 Posts: 321 Location: New Jersey

You should speak with a broker. You can learn more about FHA loans HERE. You also will have a problem getting an FHA loan based upon the income situation that you described on another post.

JPowell · Joined: 20 Jan 2010 Posts: 103 Location: PA

EricJ wrote: You also will have a problem getting an FHA loan based upon the income situation that you described on another post.

Can you expand on that a bit? Is it because I'm self employed or something else? Don't worry about tap dancing around things for my sake haha just give it to me straight! I'm sure whatever info you give will help others as well.

jhonny07 · Joined: 31 Jan 2010 Posts: 10

Have you already consulted the problem with a broker? well it would be much better to get the opinion of a broker for this one

TimtheMortgageGuy · Joined: 16 Jan 2008 Posts: 96 Location: Rosemount, MN

JPowell wrote: My understanding of FHA loans is pretty minimal to non existent. I always saw them presented as a way for people with bad credit to become home owners, but I don't know if that's actually the purpose they are meant to serve.

I used to be one of those "bad score" people but I think I'm doing decent now considering the rebound I made. I have managed to raise my scores from the high 400s into the low to mid 600s, but I still have some old negative accounts that haven't fallen off yet.

My SO had a 700+ last we checked.

Would that put us in a good spot to consider an FHA loan?
Are there other qualifications that have to be met?
How exactly do they work/what are they intended for?

Thanks!

Mostly they are geared toward those with a limited down payment. FHA only requires 3.5% down.

JPowell · Joined: 20 Jan 2010 Posts: 103 Location: PA

TimtheMortgageGuy wrote: Mostly they are geared toward those with a limited down payment. FHA only requires 3.5% down.

Thanks Tim, does that mean that if you can put more than 3.5% down you can't get approved for one? Ideally I'd like to drop a good 10% or more if possible, I just don't want to have to wait forever to get a home. My son is already almost 5 and I'm tired of him not having a yard to play in.

TimtheMortgageGuy · Joined: 16 Jan 2008 Posts: 96 Location: Rosemount, MN

JPowell wrote: TimtheMortgageGuy wrote: Mostly they are geared toward those with a limited down payment. FHA only requires 3.5% down.

Thanks Tim, does that mean that if you can put more than 3.5% down you can't get approved for one? Ideally I'd like to drop a good 10% or more if possible, I just don't want to have to wait forever to get a home. My son is already almost 5 and I'm tired of him not having a yard to play in.

No, FHA would love to see more than 3.5% down. However, if you have 10% down you are going to be better served by a conventional loan with mortgage insurance. Ask your lender to compare monthly MI to single pay (upfront) MI.

FYI-you are going to be best served if you can put down 20%.

MrPink1130 · Joined: 11 Feb 2010 Posts: 17

FHA 3.5% down.....min credit score 620

way talk to a broker....go directly to the bank

way apy a middle man to do what you can do yourself

MrPink1130 · Joined: 11 Feb 2010 Posts: 17

also, if you are in a declining market and only have 10% down, you will find out very quickly that you will have to go FHA. IF you go over 80%ltv you will be charged PMI on a monhthly basis, but if you are in a declining market-you'll never get PMI on a conventioanl loan. No PMI compnay is that stupid to offer it in a declining market.
So where are you looking to purchase? andd please don't tell me CA, AZ,FL, MI, PA, OH or any other declining market states.
Don't forget a FHA loan has an UFMIP that you have to pay that can be as high as 1.5% of the loan size.

hope this helps

allergonaut · Joined: 12 Jan 2010 Posts: 1 Location: Ðîññèÿ

Had to send another email to them today as I so far have not received my money. They have until the end of business tomorrow end of 21 days to confirm to me that payment has been made and sent to me otherwise Ill report YES Loans to the OFT.