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701 East Howard Street
Hibbing, MN 55746-0279
Phone: (218) 263.8855
Toll Free: (800) 819.0839

How Can HUD and the FHA Help me Become a Homeowner FAQs

WHO CAN QUALIFY FOR FHA LOANS?

Anyone who meets the credit requirements, can afford the mortgage payments and cash investment into a home up front, and who plans to use the mortgaged property as a primary residence may apply for an FHA-insured loan.

WHAT TYPES OF CLOSING COSTS ARE ASSOCIATED WITH FHA-INSURED LOANS?

Except for the addition of an FHA mortgage insurance premium (MIP), FHA closing costs are similar to those of a conventional loan. The FHA requires a single, upfront mortgage insurance premium to be paid at closing. This initial premium may be partially refunded if the loan is paid in full during the first seven years of the loan term. After closing, you will then be responsible for monthly MIP.

WHAT CAN I USE TO PAY THE DOWN PAYMENT AND CLOSING COSTS OF AN FHA LOAN?

Besides your own funds, you may use cash gifts from others.

WHAT ARE THE STEPS INVOLVED IN THE FHA LOAN PROCESS?

With the exception of a few additional forms, the FHA loan application process is similar to that of a conventional loan.  With new automation measures, FHA loans may be originated more quickly than before.

HOW MUCH INCOME DO I NEED TO HAVE TO QUALIFY FOR AN FHA LOAN?

There is no minimum income requirement. But you must prove steady income for at least three years, and demonstrate that you've consistently paid your bills on time.

HOW LARGE A DOWN PAYMENT DO I NEED WITH AN FHA LOAN?

You must have a down payment of at least 3.5% of the purchase price of the home. Most affordable loan programs offered by private lenders require a down payment, with a minimum of 5% coming directly from the borrower's own funds.

Commercial Real Estate Loans

HOW DOES MY CREDIT HISTORY IMPACT MY ABILITY TO QUALIFY?The FHA is generally more flexible than conventional lenders in its qualifying guidelines. In fact, the FHA generally allows you to re-establish credit if:

  • time has passed since a bankruptcy has been discharged
  • all judgments have been paid
  • any outstanding tax liens have been satisfied or appropriate arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue
  • time has passed since a foreclosure or a deed-in-lieu has been resolved – talk to a Personal Banker for details

CAN I ROLL CLOSING COSTS INTO MY FHA LOAN?

No. Though you can't roll closing costs into your FHA loan, you may be able to negotiate with the seller and have the seller pay the closing fees.

CAN I QUALIFY FOR AN FHA LOAN WITHOUT A CREDIT HISTORY?

Yes. If you prefer to pay debts in cash or are too young to have established credit, there are other ways to prove your eligibility. Talk to your lender for details.

CAN I EXCEED THIS RATIO?

You may qualify to exceed if you have:

  • a large down payment
  • a demonstrated ability to pay more toward your housing expenses
  • substantial cash reserves
  • net worth enough to repay the mortgage regardless of income
  • evidence of acceptable credit history or limited credit use
  • less-than-maximum mortgage terms
  • funds provided by an organization
  • a decrease in monthly housing expenses

CAN I CARRY DEBT AND STILL QUALIFY FOR FHA LOANS?

Yes. Short-term debt doesn't count as long as it can be paid off within 10 months. And some regular expenses, like child care costs, are not considered debt. Talk to our Personal Bankers about meeting the FHA debt-to-income ratio.

ARE FHA LOANS ASSUMABLE?

Yes. You can assume an existing FHA-insured loan, or, if you are the one deciding to sell, allow a buyer to assume yours. Assuming a loan can be very beneficial, since the process is streamlined and less expensive compared to that for a new loan. Also, assuming a loan can often result in a lower interest rate.  See your lender for details.