What Does it Take to Be FHA Approved?
- Before going to an FHA-approved lender, you'll need to gather several documents. You'll need your Social Security number, W2s for the last 2 years, your tax returns, valid identification or proof of legal residency. A lender will need to verify that you meet the FHA income requirements and will need to calculate your debt-to-income ratio. He'll also need all of your income paperwork, including child support, dividends or any other income you may have besides your regular salary.
- To meet FHA loan requirements, a borrower must earn below a certain income limit, but show enough income to afford a monthly payment. To determine whether income requirements are met, the lender will compare your income to the monthly payment amount to ensure that this payment amount is at or below 30 percent of your total income. FHA requires that your debt-to-income ratio be between 28 to 30 percent, meaning all of your debt, including your monthly mortgage, car payment, and credit card debt, cannot exceed that 30 percent debt-to-income ratio.
- Although a lender cannot deny a potential mortgage borrower for not having a substantial credit history, the potential borrower needs to show on-time payments for a period of 2 years, and a lack of bad credit. He must not have had any bankruptcies or foreclosures within a 3-year period. Lenders will consider payments such as apartment rentals, auto insurance and utility payments.
- FHA has set requirements for lenders as to which closing costs are allowable. However, borrowers still have to have a set dollar amount set aside for these costs, which are determined by each of the local FHA offices. Among the most common fees allowed by FHA are the lender's origination fee, attorney's fees, the deposit verification fees, title insurance and examination, document preparation, property survey, credit reports, appraisal fee, inspection fees, recording fees, taxes, certification fees and home inspection fees.
