To benefit from the FHA program, the first step is to inquire as to which lenders and/or mortgage brokers originate FHA loans. Rates and terms vary with each lender, so it is encouraged to make thorough comparisons. Second, the potential lender will assess and analyze the home buyer for risk and determine the type of home that can be afforded based on factors like monthly income, expenses, payment history and debts. The required documents are as follows: (1) two-year history of employment (the last two years of schooling can be used if one is currently working in his field of study); (2) credit scores of above 620 for conventional financing, and 580 for FHA; VA follows a case by case basis. If there is no credit history, documents that establish good credit payment (e.g. bills and rental history) may be used; (3) proper identification as defined by the Patriot Act (State Driver’s License or Birth Certificate with a copy of Social Security card) and; (4) debt ratio of below 36/46.

Qualifying for an FHA loan promises a higher chance of acquiring an excellent mortgage deal from respective lenders. This is because the FHA itself insures the loan the home buyer makes. With the help of the FHA program, potential buyers pay lower down payments and closing costs, and actually get to own their homes legally. People are no longer necessarily hindered by economic recession and mortgage loan denials, making the dream of owning a home within reach.

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How does one Qualify for FHA loan? Many people are afraid that they will never again be able to get a housing loan because they have low credit scores and because they do not have enough money to show for.

People who try applications for any housing loan must of course be thoroughly checked first because they will be given such a large responsibility. The lenders are really taking a very big risk in giving a person enough money to buy a house. How will they be able to know if the person they are giving money to will actually be able to pay the money back? Of course the credit score and credit history from which the score is based on was created in order to calculate this risk factor. The credit history is the list of loan transactions and payments that a person has ever done in his entire life. From the first time one avails his or her credit card, to every single payment a person makes on these credit card loans along with all his or her loans. There are particular score additions and subtractions done for every good or bad action. Paying on time gets you good points; delayed payments get you minus points. The compiled score is what is called the credit score or the FICO score. This is what helps companies determine whether you are trustworthy or not since they will of course base things on your previous credit habits.

So if you have a bad score and you do not have such a high income, then most traditional loaners will not let you have a housing loan. After all, a housing mortgage is very big. It is a loan that will have to be paid for several years and anything could very well happen in those years. You might lose your job or you might get into some personal problems and start becoming irresponsible with your payments.

But with the FHA loan, things are different. An FHA loan is a government insured loan. That is why even people who do not have such high scores and those who have middle or low income can still acquire this loan. The government, in trying to stimulate the home ownership market, has issued these loans to private lenders which they have insured and will thus pay for if the borrower somehow defaults on the loan.