Full Service Mortgage Group, LLC
(629) 235-7156

FHA Loans

FHA home loans are mortgage loans that are insured against default by the Federal Housing Administration (FHA). FHA loans are available for single family and multifamily homes. These home loans allow banks to continuously issue loans without much risk or capital requirements. The FHA doesn't issue loans or set interest rates, it just guarantees against default.

FHA loans allow individuals who may not qualify for a conventional mortgage obtain a loan, especially first time home buyers. These loans offer low minimum down payments, reasonable credit expectations, and flexible income requirements.

In 1934, the Federal Housing Administration (FHA) was established to improve housing standards and to provide an adequate home financing system with mortgage insurance. Now families that may have otherwise been excluded from the housing market could finally buy their dream home.

FHA does not make home loans, it insures a loan; should a homebuyer default, the lender is paid from the insurance fund.

  • Buy a house with as little as 3.5% down - the minimum downpayment for FHA loans.
  • Ideal for the first-time homebuyers unable to make larger down payments.
  • The right mortgage solution for those who may not qualify for a conventional loan.
  • Down payment assistance programs can be added to a FHA Loan for additional down payment and/or closing cost savings.

Your loan approval depends 100% on the documentation that you provide at the time of application. You will need to give accurate information on:

Employment

  • Complete Income Tax Returns for past 2-years
  • W-2 & 1099 Statements for past 2-years
  • Pay-Check Stubs for past 2-months
  • Self-Employed Income Tax Returns and YTD Profit & Loss Statements for past 3-years for self-employed borrowers

Savings

  • Complete bank statements for all accounts for past 3-months
  • Recent account statements for retirement, 401k, Mutual Funds, Money Market, Stocks, etc.

Credit

  • Recent bills & statements indicating account numbers and minimum payments
  • Landlord's name, address, telephone number, or 12- months cancelled rent checks
  • Recent utility bills to supplement thin credit
  • Bankruptcy & Discharge Papers if applicable
  • 12-months cancelled checks written by someone you co-signed for to get a mortgage, car, or credit card, this indicates that you are not the one making the payments.

Personal

  • Drivers License
  • Social Security Card
  • Any Divorce, Palimony or Alimony or Child Support papers
  • Green Card or Work Permit if applicable
  • Any homeownership papers

Refinancing or Own Rental Property

  • Note & Deed from any Current Loan
  • Property Tax Bill
  • Hazard Homeowners Insurance Policy
  • A Payment Coupon for Current Mortgage
  • Rental Agreements for a Multi-Unit Property

The main difference between an FHA loan and a conventional home loan is that an FHA loan requires a lower down payment and has less strict credit qualifying criteria. This allows individuals without a strong credit history—or those with minor credit issues—to buy a home. FHA loans require a reasonable explanation for any derogatory items but use common-sense credit underwriting. Some borrowers with extenuating circumstances, such as a bankruptcy discharged three years ago, may still qualify for an FHA loan after bankruptcy, making homeownership more accessible despite past financial setbacks. When comparing a conventional loan vs FHA, it's important to note that conventional financing relies heavily on credit scores from agencies like Experian, TransUnion, or Equifax. If your score falls below the minimum threshold, you may not qualify.

Your monthly costs should not exceed 29% of your gross monthly income for a FHA Loan. Total housing costs often lumped together are referred to as PITI.

P = Principal

I = Interest

T = Taxes

I = Insurance

Examples:

Monthly Income x .29 = Maximum PITI
$3,000 x .29 = $870 Maximum PITI

Your total monthly costs, or debt to income (DTI) adding PITI and long-term debt like car loans or credit cards, should not exceed 41% of your gross monthly income.

Monthly Income x .41 = Maximum Total Monthly Costs
$3,000 x .41 = $1230
$1,230 total - $870 PITI = $360 Allowed for Monthly Long Term Debt

FHA Loan ratios are more lenient than a typical conventional loan.

Yes, generally a bankruptcy won't preclude a borrower from obtaining a FHA Loan. Ideally, a borrower should have re-established their credit with a minimum of two credit accounts such as a car loan, or credit card. Then wait two years since the discharge of a Chapter 7 bankruptcy, or have a minimum of one year of repayment for a Chapter 13 (the borrower must seek the permission of the courts). Also, the borrower should not have any credit issues like late payments, collections, or credit charge-offs since the bankruptcy. Special exceptions can be made if a borrower has suffered through extenuating circumstances like surviving a serious medical condition, and had to declare bankruptcy because the high medical bills couldn't be paid.