FHA Loan Guidelines

Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development's (HUD) Office of Housing in 1965. FHA is the only government agency that operates entirely from its self-generated income and costs the taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely. FHA provides a huge economic stimulation to the country in the form of home and community development, which trickles down to local communities in the form of jobs, building suppliers, tax bases, schools, and other forms of revenue.
 
The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders. FHA insures these loans on single family and multi-family homes in the United States and its territories. It is the largest insurer of residential mortgages in the world, insuring tens of millions of properties since 1934. The FHA mortgage insurance is a policy that protects lenders, not borrowers, against losses that result from defaults on home mortgages. 
 
Most home buyers who are unable to put down at least 20 percent of the cost of a house have to pay mortgage insurance, whether the loan is conventional or backed by the FHA. Because FHA-insured loans typically are riskier than conventional loans. FHA loans require smaller down payments, and the restrictions for income and debt aren’t as stringent as they are for conventional loans.
 

FHA LOAN GUIDELINES

 
BASIC REQUIREMENTS
Should have a history of paying the bills on time and you do not have an FHA mortgage loan.
 
GRACE PERIOD AFTER A FORECLOSURE
If you have had a foreclosure, you will need to wait a minimum of three years to qualify for a FHA Loan. In addition, your name needs to be removed from the CAVIRS database in order to become eligible.  
 
INCOME CAP AND REQUIREMENTS
There is no income cap for obtaining a FHA loan.
 
DOWN PAYMENT
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.
 
DOWN PAYMENT ASSISTANCE
You can pay 100% of the down payment with grants from family, relatives, or authorized organizations.
 
LOAN LIMITS
The current loan limits for Santa Cruz County, Arizona is $271,050 for single family, $347,000 for a Duplex, $419,425 for a Tri-plex, and $521,250 for a Four-plex. Look up FHA Loan Limits for Arizona.
 
FHA MORTGAGE INSURANCE PREMIUMS (MIP)
Effective June 2013, new borrowers in the FHA program must pay mortgage insurance throughout the life of their loans, whether it’s a 15-year or 30-year note.
 
MONTHLY INSURANCE RATE
Effective January 26, 2015, the monthly insurance rate is .85%.
 
UPFRONT MORTGAGE INSURANCE
The upfront mortgage insurance premium, which is financed as part of the loan, is currently at 1.75%.
 
LOWER CREDIT SCORES
FHA requires lenders to manually underwrite loans in cases in which borrowers have credit scores lower than 620 and total debt-to-income ratios higher than 43 percent. In these instances, lender must also document any factors that support approving the loan.
 
OWNER OCCUPANCY
The individual obtaining the loan must also have the intent to occupy the single family home. However the following exception may apply with FHA approval, referred to as a kiddie condo in the real estate industry. The parent and the child of age would be able to apply for the FHA loan.
 

ADDITIONAL RESOURCES FOR FHA LOANS

FHA LOAN CALCULATOR
CAIVRS CREDIT REPORTING SYSTEM
FHA LOAN LIMITS LOOKUP
LET FHA LOANS HELP YOU