Austin TX FHA Loans | Austin Purchase Loans

FHA Loan

FHA Loan:

FHA mortgage loans are issued by federally qualified lenders and insured by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development.

FHA loans are an attractive option, especially for first-time homeowners:

Generally easier to qualify for than conventional loans.
Lower down payment requirements.
Cannot exceed statutory loan limits.

Learn more about FHA loans. (Department of Housing and Urban Development)

Seven things to know about getting an FHA loan today:

You should go to an FHA-approved lender or broker, Councilman says. He recommends consumers also use a broker certified by the NAMB. For a list of FHA-approved lenders and brokers, go to the U.S. Department of Housing and Urban Development Web site.
You can expect a low down payment. An FHA loan requires only a 3.5 percent down payment and you can get that down payment as a gift. For a borrower low on down payment funds, this is a great advantage. "You can get a gift from an approvable source such as an employer, relative or a nonprofit or government agency that offers down payment assistance," says Councilman.
Because FHA insures your mortgage, lenders may be more willing to give borrowers loan terms that make it easier to qualify. According to HUD, in a 19-month period from January 2008 to August 2009, the average credit score for FHA-insured mortgage loans increased from 621 to 692. For conforming loans, credit scores in this range will require a 20 percent to 30 percent down payment. "It's up to the underwriter to determine the acceptable credit score," says Councilman.
First-time buyers have some advantages. "A huge thing is that they can have a non-occupant co-borrower," says Alexander Castellanos, a loan officer with SunTrust Mortgage and a governor for the Mortgage Bankers Association of Florida.

"For a kid who just finished college and has nominal credit, a parent can co-sign. Then, once the kid is in better financial shape, he or she can assume the loan without having to refinance to possibly higher rates," he says.
Sellers can contribute to closing costs. "Sellers can pay up to 6 percent of the purchase price. So if you have a $100,000 home, they can pay up to $6,000 toward closing costs," says Councilman. In a traditional loan, sellers can only contribute up to 3 percent.
There's help in finding the FHA loan limits in your area. FHA loan limits -- the maximum amount a homebuyer can borrow -- vary based on a variety of housing types and the state and county in which the property is located. To look up your area's loan limits, go to the HUD Web site.

"Some counties have loan limits below $300,000 while others have limits as high as $729,000," says Councilman.
For FHA approval, you'll need to document your income well. "FHA does have some rules that are tougher than with conventional loans," says Councilman. For example, in order to get approved for an FHA loan, you must account for every penny (of income) that comes in, he says. "Conventional loans start with lower qualifying ratios," he says.
Councilman says, "Fannie Mae and Freddie Mac's qualifying debt to income ratio is approximately 28 percent (percentage of gross monthly income used to pay housing costs) to 36 percent (the percentage of income that goes toward paying all recurring debt payments including housing); FHA's starting ratio is 31 percent to 43 percent. They also want income documentation to prove you have a stable source of income before approving the loan."