FHA Home Loan

The Federal Housing Administration (FHA) was established to improve housing standards and to provide an adequate home financing system with mortgage insurance. Families that may have otherwise been excluded from the housing market could now purchase a home. 

FHA does not supply mortgage loans, it insures them. If a homebuyer defaults on their loan, the lender is compensated from the insurance fund.

FHA is:

• Buy a house with as little as 3.5% down.

• Ideal for the first-time homebuyers unable to make larger down payments.

• The right mortgage solution for those who may not qualify for a conventional loan.

• Down payment assistance programs can be added to a FHA Loan for additional down payment and/or closing cost savings.

Your loan approval is completely dependent on the documentation that you provide during the application process. You will need to provide accurate information on:

Employment

• Complete Income Tax Returns for past 2-years

• W-2 & 1099 Statements for past 2-years

• Pay-Check Stubs for past 2-months

• Self-Employed Income Tax Returns and YTD Profit & Loss Statements for past 3-years for self-employed borrowers

Savings

• Complete bank statements for all accounts for past 3-months

• Recent account statements for retirement, 401k, Mutual Funds, Money Market, Stocks, etc.

Credit

• Recent bills & statements indicating account numbers and minimum payments

• Landlord's contact information and/or 12- months cancelled rent checks

• Recent utility bills to supplement credit, if necessary

• Bankruptcy & Discharge Papers, if applicable

• 12-months cancelled checks written by a co-signer used to get a mortgage, car, or credit card, this demonstrates that you are not the one making the payments.

Personal

• Drivers License

• Social Security Card

• Any Divorce, Palimony, Alimony or Child Support documents

• Green Card or Work Permit, if applicable

• Any homeownership papers

Refinancing or Own Rental Property

• Note and Deed from any Current Loan

• Property Tax Bill

• Hazard/Homeowners Insurance Policy

• A Payment Coupon for Current Mortgage

• Rental Agreements for a Multi-Unit Property

The main difference between a FHA Loan and a Conventional Home Loan is that a FHA loan requires a lower down payment, and the credit qualifying criteria for a borrower is not as strict. This allows those without a credit history, or with minor credit problems to buy a home. FHA requires a reasonable explanation of any derogatory items, but will use common sense credit underwriting. Some borrowers, with extenuating circumstances surrounding bankruptcy discharged 3-years ago, can work around past credit problems. However, conventional financing relies heavily upon credit scoring, a rating given by a credit bureau such as Experian, Trans-Union or Equifax. If your score is below the minimum standard, you may not qualify.

Yes, generally a bankruptcy won’t preclude a borrower from obtaining a FHA Loan. Ideally, a borrower should have re-established their credit with a minimum of two credit accounts such as a car loan, or credit card. Then wait two years since the discharge of a Chapter 7 bankruptcy, or have a minimum of one year of repayment for a Chapter 13 (the borrower must seek the permission of the courts). Also, the borrower should not have any credit issues like late payments, collections, or credit charge-offs since the bankruptcy. Special exceptions can be made if a borrower has suffered through extenuating circumstances like surviving a serious medical condition, and had to declare bankruptcy because the high medical bills couldn't be paid.