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Quesitons on Obtaining a FHA Loan

In the next month or two my wife and I are planning on starting the process of buying our first home and will be looking for pre approval on a FHA Loan.  To give you some background:  I'm a consultant at $52/hr in south florida, so if you were to directly translate to annual salary, about $108k, and I am the only income.  I always work at least 40 hrs a week steady, sometimes more though.  Between my car payment, credit cards, etc... I have about $800/month I pay out in debt.  My current rent is $1475 on an apartment.  By the time we start the process we'll have about $7,000 - $8,000 for a down payment, maybe more.  I have only been at my current job for 5 months, probably 6 when I apply for the loan, but I have a steady employment history back 7 or 8 years.  In my field (information technology) you move around a lot.  I know some will say just stash away 20% with my income and pay off all debt, but we really want to get into a house in the next couple of months to avoid renewing our lease and are just preparing the down payment and a buffer on top of that. I'm actually only looking for a small starter house at a maximum value of $170k, the lower the better.  My preference is to reduce my rent/mortgage by at least $200.00  My FICO score is I believe about 715-720.  Also, one of my credit accounts (a furniture company) has a balance about 70% of the total credit, not sure if this even matters. My questions are as follows:

1. Will I have any difficulties getting an FHA?
2. Are there any fees outside of the 3.5% down payment and closing costs that I need to account for?
3. Will my current employment be an issue?
4. Is my wifes credit checked during the process?  Not that it matters, it's flawless.  She was just wondering considering I am the sole income.

Any advice would be greatly appreciated!
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January 18 2011 - Pembroke Pines
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Replies (5)

1. Will I have any difficulties getting an FHA?
Impossible to say over a thread. Need to take a full app. FHA has MANY guidelines.

2. Are there any fees outside of the 3.5% down payment and closing costs that I need to account for?
The 3.5% is down payment, not a fee. But I think you realize that. In general the Lender fees are about $1500 (more or less). The title fees about $2000 (depends on county). Then about $1000 in misc. fees. I am being very general here. You can negotiate the Seller to pay up to 6% of the purchase price towards your closing costs. An appraisal will be required up front. Most other fees can be paid at closing.

3. Will my current employment be an issue?
If you are currently a W2 employee, most likely no. If you are self-employed you will need a solid 2 years income as self-employed. If you have bounced around between how you file,..it can be an issue. For example if you have spent the past 2 years 1099,..fine. But if you were 1099, then W2, then Sole Proprietor, then back to 1099,...it will be a big issue.

4. Is my wifes credit checked during the process?  Not that it matters, it's flawless.  She was just wondering considering I am the sole income.
Only those going on the loan need a credit check.

Your best bet is to find an FHA lender and spend 15 minutes doing a good Q/A session to see if you can qualify. Hope this helps!
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January 18 2011

1.  You won't as long as you have no large gaps of employment during, primarily the last 2 years. 

2. Yes - but they should be minor -- appraisal fee (only paid after approval) is between 395 - 450 -- home inspection and perhaps a mitigation report for an insurance discount.

3.  Current employment -- will not be an issue as long as there is consistant employment over the past 2 years.

4.  Wife's credit -- typically no, not unless she has income to contribute to the application. 

A few things not mentioned above -- if you are renting from a private party (not management company) you will have to show cancelled checks for 12 months.  When you have little cash, a seller concession can help pay closing costs. 

No one can really begin to put you in the best position to purchase via an FHA loan until you give an application for specific answers. 

All the best


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January 18 2011

Do not waste your time go to mortgage officer get the application done.
I wish you good luck!

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February 14 2011

Dear Renter77,
Although I personally originate loans only in CA, having done many, many FHA loans during my 20+ years in the business I can tell you the following:

You should definitely get in touch with a local lender who is conversant in FHA loans.  From the way you have described your income, I am guessing that you are essentially a self-employed person who is paid a nice hourly fee but who writes his expenses off against that income at tax time.  It is for that very reason that a lender will need to look at your last two years federal tax returns to determine what your average monthly pay is.  2010 will be of great interest, so it would behoove you to get those ready to file ASAP.

As to your money outlay, the 3.5% down payment is the minimum contribution that FHA requires (although there may be local first-time homebuyer assistance available in your area, subject to income availablity).  Other than that, there are other monies to pay for various recurring and non-recurring closing costs, although these can sometimes be paid by the seller or by lender rebates.

On your other questions, I generally agree with Robert above.

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February 14 2011
You should have no problem getting a FHA mortgage.
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February 23 2011
 
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