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.
- 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:
- Current paystub covering 30 days and Verification of Employment covering two years
- Additional documentation required for self-employed borrowers, including tax returns for last two years
- One month bank statements covering last thirty days with ending balance
- Recent account statements for retirement, 401k, Mutual Funds, Money Market, Stocks, etc.
- Credit Report
- Landlord's name, address, telephone number, or 12- months cancelled rent checks
- 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, if needed to not count a debt your debt ratio
- Drivers License
- Social Security Card
- Green Card or Employment Authorization document, 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 a FHA Loan and a Conventional Home Loan is that a FHA loan requires a lower down payment, and the credit qualifying criteria for a borrower is not as strict. This allows those with minor credit problems to buy a home. FHA requires a reasonable explanation of any derogatory items, but will use common sense credit underwriting. Some borrowers, with extenuating circumstances surrounding bankruptcy discharged 3-years ago, can work around past credit problems.
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.