An FHA loan is insured against default by the Federal Housing Administration (FHA). FHA loans help buyers with less than perfect credit purchase homes.
FHA Loan Requirements
Ø Minimum credit score of 580
Ø Down payment of 3.5% of purchase price. (Down payment can be a gift from a family member.)
Ø With a 10% down payment lenders may consider credit scores of 500-579
Ø Total mortgage payment must be less than 31% of gross income. The total payment includes mortgage payment, escrow payments for property taxes, homeowner’s insurance and mortgage insurance.
Ø Must have monthly debt payments of less than 43% of gross income. This includes the mortgage payment, car payments, student loans, credit cards and any other debt.
Ø Two years or more since bankruptcy.
Ø Three years or more since foreclosure.
Ø The property must pass an FHA inspection.
Ø An up-front mortgage insurance payment of 1.75% of the loan amount that can be added to the loan. (For a $150,000 loan $2,625)
Ø Monthly mortgage insurance until the home’s value is greater than 80% of the mortgage balance.
Follow this link to an easy to use FHA payment calculator.
Mortgage Credit Certificate (MCC) program
This program may be used with any 30-year, fixed-rate mortgage. It gives a federal tax credit based on interest paid each year.
Requirements for a Mortgage Credit Certificate
Ø Be a first-time home buyer (or have not owned a home in the last three years)
Ø Must buy a new or existing home. Refinancing does not qualify
Ø Must buy a home in Alabama and occupy it as your primary residence.
Ø Must meet federally established income and sales price limits
Ø Must have a 30-year loan.
Most lenders require a credit score of 560 – 580 or higher. Get a free copy of your credit report
This information is a summary only and not to be used to make financial decisions. Contact an experienced local lender for full and current information.