Know about FHA Loan Requirements in Texas: DTI, Documentation, and More

Did you know the Federal Administration came into appearance during the Great Depression? The housing trouble was going through a terrible state.  At this time, the rates of foreclosure and default touched the sky. Therefore, stimulation in the housing market was much needed! The government-backed federally insured loan program emerged in the market. Of course, you know it as FHA that provides benefits to people with a poor credit score. The program also works on reducing the lender’s risk and making it easier for borrowers to qualify. However, everyone is not aware of the loan requirements either.

FHA loan has gained much popularity for varying a lot from the traditional loan. The Federal Housing Administration offers loan insurance on the lenders in Houston, Texas. Gradually, it has become one of the largest insurers of house loans in the world. Now, it is possible to borrow around 96.5% of the home value with an FHA loan. So, the loan can be a turning point and you can achieve your dream in the easiest way. If you wish to know about the FHA loan requirements Texas, you need to go through the rest of the article. 

Know about Debt-to-Income Ratio

Every lender focuses on the DTI ratio, no matter which type of mortgage it is. The DTI calculates the percentage of pretax income along with credit card expenditure, mortgage expenses, and monthly debt payments. It is essential to figure out the DTI to understand where exactly you are standing. In addition to the context, the FHA loan needs a DTI of 50% or less. 

Gather the Authentic Documents 

In order to prove eligibility, you need to submit a set of documents. It is important to submit a proof of social security number along with the original documents of valid tax returns or W-2 forms and pay stubs. There are other things that your lender can help you walk through. 

Learn about Foreclosure and Bankruptcy 

When a borrower has a history of foreclosure, it should not be an obstacle for accessing the mortgage. Here, the circumstances only matter. Also, bankruptcy does not turn down a person’s FHA loan application either. If it is Chapter 7 bankruptcy, the borrower needs to re-establish a strong credit score. 

Understand the Property Requirement 

Apart from the borrower’s qualification, the property needs to undergo certain requirements before qualifying. FHA loan is only applicable for the property considered as a primary residence and minimum one borrower needs to occupy the property in 2 months of closing. The property cannot be used for investment purposes. Also, you must be the owner of the property or living trust can be. The FHA appraisal involves inspection and it checks whether the house meets the minimum property standard. 

At last but not the least, the credit score requirement is a must thing to know. For FHA loans, people with 580 or above can apply with a 3.5% down payment. If the score is 500 (or below 580), you might have to choose a 10% down payment.  So, it’s always better to talk to a lender now!

Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.