September 23, 2013
A reader asks, “The insurance for fha does it include in your morgtage or you have to pay that together with the downpayment? Do you know before you pick the house the amount you qualify for? How hard is it after one year of bankruptcy? I was laid off and did not work for close to two years due to the economy. how hard is it to get a lender with a score of 580???? Can closing cost be included in mortgage?
This is a lot of questions, but the first and most important question is the matter of FICO scores. The reader asks how difficult it is to get a lender when the borrower has a 580 credit score. We can’t speak for all lenders, but in general a borrower should have a minimum FICO score of 620 (as the lowest score) before applying for an FHA mortgage.
It’s technically true that borrowers with FICO scores below 620 but higher than 500 are eligible to apply. But many lenders won’t approve an FHA loan for an applicant with a FICO score lower than 620, and the lender is perfectly free to do this.
The borrower’s question, “Do you know before you pick the house the amount you qualify for? ” could be answered by getting pre-approved for an FHA loan amount, but in general the FHA loan amount is determined by the sale price of the home or the appraised value (whichever is lower) plus considerations made based on the borrower’s creditworthiness.
The answer to the bankruptcy question is essentially, “It depends.” It depends on a variety of factors including the type of bankruptcy, whether the borrower established a solid credit history in the wake of the bankruptcy or at the very least a record of on-time and reliable payments.
The borrower’s question about closing costs is answered in a general way on the FHA/HUD official site, which states, “Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.”
FHA loans require both an Up Front Mortgage Insurance and a mortgage insurance premium. FHA recently changed the rules for its mortgage insurance premium requirements which includes the following guidance to lenders as found in Mortgagee Letter 13-04:
“For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first. For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.”
Do you have questions about FHA loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: