Mortgage Blog

Estero FHA Mortgage

Many first-time homebuyers with limited income, and borderline credit, may find they qualify for an FHA loan instead of a traditional mortgage loan. FHA mortgages offer flexibility that is not found in other mortgage products. There are qualifications that must be met, but they are often less stringent than traditional mortgages.

Credit Scores and an FHA Mortgage Loan

As a general rule, most mortgage lenders prefer a borrower have a credit score of 620 or better. However, the FHA has more flexible requirements. Borrowers who wish to qualify for an FHA mortgage loan with only 3.5 percent down payment should have a credit score of at least 580. Those who have a credit score of 550 – 570 will typically have to put down 10 percent of the purchase price.

Caps on FHA Mortgages

Residents of Lee County may be eligible for a mortgage of up to $294,515 for a single family home using FHA guidelines. Keep in mind, FHA is not a loan, it is an insurance program that is offered as protection to mortgage lenders; the FHA does not make direct loans.

Closing Costs and Down Payments

Generally, when applying for a mortgage, the borrower is limited as to how much money can be gifted towards their down payment. Mortgage lenders look for “seasoned” funds (e.g. those funds which the borrower has saved over time) for use as a down payment. However, a borrower who qualified for an FHA loan may be eligible to have their entire down payment given as a gift from a family member. In addition, FHA loans also allow the seller to pay up to six percent of the total closing costs associated with the loan. In some cases, there may be additional down payment assistance available for eligible borrowers.


Debt to Income Ratios

One of the factors a lender will take into consideration when underwriting an FHA loan is debt to income ratios. This ratio is reached by taking your total income and calculating how much of your income is paid in debt. Here’s what it looks like:

  • Total non-housing payments monthly: $500
  • Total housing payments (mortgage, tax, insurance): $1,500
  • Total Monthly Debt: $2,000
  • Total Monthly Income: $4,000
  • Debt to income ratio: 50 percent

While most mortgage lenders look for debt to income ratios of 43 percent or less, FHA mortgage loanguidelines allow for debt to income ratios of up to 55 percent.

Contact us if you are interested in learning more about qualifying for an FHA mortgage loan.

Rates, Programs, Guidelines are subject to change without notice. Please call today so we can discuss your current financial situation and tailor a loan to meet your needs.


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