If you’re looking to buy a house, figuring out which mortgage is best for your needs can feel like a bit of a mystery. Generally, the higher your income is and the fewer debts you have, the easier it will be to qualify for a mortgage. However, for low-income borrowers, getting a loan isn’t always easy. The FHA loan program is there to help, but with economic uncertainty changing the market, can you still qualify for an FHA mortgage in the first place? Well, it depends on where you stand financially.
Get to Know Your Credit Score
The first thing you need to do is figure out your credit score. To qualify for an FHA mortgage, you’ll need to have a score of at least 580. Ideally, you should be closer to 600. This will make it easier to convince lenders to offer you a loan. The higher your credit score is, the better your loan terms will be. If you want to give it a boost before you apply for a loan, start repaying your debts and avoid applying for other lines of credit or loans until you get your mortgage.
You’ll Need a Down Payment
To qualify for an FHA mortgage, you’ll need to have at least a small amount of savings to use as a down payment on your home. In most cases, this will be about 3.5 percent of the home’s sale price. If you don’t have a down payment saved, you can always look for a first-time home buyer’s assistance program in your state to help make up the difference. If you don’t put 20 percent down on the home, you’ll also need to pay for private mortgage insurance before you can get the loan. You’ll pay for the insurance with your mortgage payment each month.
Pay Attention to Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is based on the total amount of debt you have and the amount of money you earn before taxes each year. To qualify for an FHA mortgage, you’ll need to have a debt-to-income ratio of at least 43. If your DTI is higher than that, qualifying will be tough. You can always work on decreasing the amount of money you owe or finding ways to add to your income.
If you’re interested in using an FHA mortgage to buy a house in 2020, it’s definitely possible. You just need to understand and explore your options. Start by applying online today.