FHA Loans

The popularity of FHA loans has skyrocketed in recent years. The federal government backs FHA loans so they have relatively competitive interest rates, less stringent underwriting standards and require smaller down payments. They’re particularly appealing to young, first-time homebuyers who lack substantial credit histories and cash reserves, especially since loan underwriters permit non-traditional lines of credit, like insurance premiums and utility bills.

Down payments may be as low as 3.5 percent, gifted, and buyers don’t need financial reserves beyond immediate closing costs. Also, an applicant may co-sign with a non-occupant co‐borrower like a parent to offset many issues.

These loans are relatively easy to refinance and are relatively forgiving of bankruptcies and foreclosures. They simply require a two-year wait time following a discharge. However, be prepared for stricter appraisals, strict accounting of income, and lower loan limits. Also, FHA loans don’t work for investment and vacation homes and a spouse’s debts can work against you, even if the spouse doesn’t co‐sign.

Benefits of an FHA Loan:

  • Easy to refinances
  • No cash reserve requirement
  • Down payments may be gifted
  • Relatively competitive interest rates
  • Down payments as low as 3.5 percent
  • Less stringent underwriting requirements
  • Allows the buyer to co‐sign with a non‐occupant co‐borrower

What you Need:

  • Your driver’s license
  • Your social security card
  • Payment stubs for the past month
  • Contact information for your landlord
  • Copies of your past two tax returns if you are employed
  • Copies of your past three tax returns if you are self employed
  • An accounting of regular monthly bills, including account numbers
  • A profit and loss statement for the current year if you run a business
  • Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.