An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for monthly mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.
Less rigorous lending standards and lower down-payment requirements make FHA loans popular with mortgage borrowers.
- Low Down Payments
- Low Closing Costs
- Easy Credit Qualifying
30-year Mortgage
As of 2018, these loans allow the borrower to borrow up to 96.5% of the value of the home; the 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time homebuyers.
The FHA recently announced that the new FHA single family loan limit for Michigan will be $498,257.
First, a borrower must have a steady history of employment or at least a 2 year history with the same employer. This is important because the FHA requires a borrower’s front-end ratio – which is the summation of the monthly mortgage payment, HOA fees, property taxes, mortgage insurance, and homeowner’s insurance – be less than 31% of total gross income. However, it is possible to be approved with a 40% ratio.
Additionally, a borrower’s back-end ratio – which is the summation of the monthly mortgage payment and all other monthly consumer debts – is required to be less than 43% of total gross income. However, it is possible to be approved with a ratio as high as 50%.
Requirements for an FHA Loan
- Income and Debt – Your income and your monthly expenses are important. FHA allows you to use 31% of your income towards housing costs and 43% towards housing expenses and long-term debt.
- Credit History – Your credit history is important. The minimum credit score for FHA loan programs is 620 or above.
- Mortgage Limits – The FHA single family loan limit for Michigan is $498,257. FHA loan limits may vary based on location and property type (such as a single-family home or duplex).
- Borrowers – must have a valid Social Security number, valid ID, lawful residency in the U.S. and be of legal age to sign a mortgage in your state.
- New FHA loans are only available for primary residence occupancy.
- Loan-to-Value Limits – There are value-based limits on FHA loan financing. Current FHA programs permit up to 96.5% loan-to-value.
- Bankruptcy – borrowers must be two years out of bankruptcy and have re-established good credit.
- Foreclosure – Typically borrowers must be three years out of foreclosure and have re-established good credit.
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Superior National Bank is here help answer your questions. Since home loans can be complicated, I can help inform you of every aspect regarding the mortgage process. I look forward to hearing from you.
Julie Krumholz
Superior National Bank, Member of the FDIC. Equal Housing Lender. Some products may not be available in all states. Credit and collateral are subject to approval. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. Terms and conditions apply. All rights reserved.