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Because of tighter mortgage restrictions, FHA loans, in Connecticut and other areas, are increasing in popularity. A government program offering financing to those with less than desirable backgrounds, FHA mortgages are government-insured to reduce risks of loss and are considered one of the easiest loans to qualify for. If you are working with a Connecticut mortgage service to find financing, you'll likely be presented with an FHA program, so what should you keep in mind?
Qualifications
Although FHA loans have looser qualifications, these mortgages still have guidelines. Any interested borrower must have steady employment history for at least two years. He or she must have a valid social security number, be a U.S. resident, and also be legal age to sign a mortgage. Typically, a borrower is expected to make a 3.5 percent down payment, which can come from a gift. An FHA-approved appraiser must appraise the property in the application process.
Aside from these requirements, the mortgage payment must be less than 31 percent of the borrower's monthly income. Total debt, including the mortgage payment and other expenses, cannot exceed 43 percent of his or her monthly income. Additionally, borrowers must have a 500 minimum credit score, be two years out of bankruptcy, and be three years out of foreclosure with good credit.
Mortgage Insurance
As any reputable Connecticut mortgage service will explain to a borrower, FHA loans require two types of mortgage insurance premiums. An upfront mortgage insurance premium is paid in full or financed into the mortgage. The other is a monthly payment, or annual MIP, that's one percent of the total mortgage and based on a borrower's loan to value ratio and length of loan.
Not All FHA Loans Are The Same
Although FHA loans in Connecticut and other locations have similar guidelines, not all programs are identical, with some better for your financial background that others. What options could a Connecticut mortgage service present? Depending upon what you're looking for and what matches your background, FHA loans are available with fixed or adjustable rate interest. Energy-efficient loans, for making such improvements to a property and ultimately lowering bills, are another option.
Or, if you expect your income to increase over the next few years, Graduated Payment and Growing Equity mortgages are geared toward homebuyers with low to moderate income who predict this monthly amount to start increasing over the next five to 10 years. Payments start smaller and then increase over time.
Qualifications
Although FHA loans have looser qualifications, these mortgages still have guidelines. Any interested borrower must have steady employment history for at least two years. He or she must have a valid social security number, be a U.S. resident, and also be legal age to sign a mortgage. Typically, a borrower is expected to make a 3.5 percent down payment, which can come from a gift. An FHA-approved appraiser must appraise the property in the application process.
Aside from these requirements, the mortgage payment must be less than 31 percent of the borrower's monthly income. Total debt, including the mortgage payment and other expenses, cannot exceed 43 percent of his or her monthly income. Additionally, borrowers must have a 500 minimum credit score, be two years out of bankruptcy, and be three years out of foreclosure with good credit.
Mortgage Insurance
As any reputable Connecticut mortgage service will explain to a borrower, FHA loans require two types of mortgage insurance premiums. An upfront mortgage insurance premium is paid in full or financed into the mortgage. The other is a monthly payment, or annual MIP, that's one percent of the total mortgage and based on a borrower's loan to value ratio and length of loan.
Not All FHA Loans Are The Same
Although FHA loans in Connecticut and other locations have similar guidelines, not all programs are identical, with some better for your financial background that others. What options could a Connecticut mortgage service present? Depending upon what you're looking for and what matches your background, FHA loans are available with fixed or adjustable rate interest. Energy-efficient loans, for making such improvements to a property and ultimately lowering bills, are another option.
Or, if you expect your income to increase over the next few years, Graduated Payment and Growing Equity mortgages are geared toward homebuyers with low to moderate income who predict this monthly amount to start increasing over the next five to 10 years. Payments start smaller and then increase over time.
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