You can not get a FHA loan at all if you have no income. The amount is not really the problem but your ability to pay you bills on time. To qualify for an FHA loan, you’ll need to have reasonable debt to income ratios.

In general, you have to be better than 29/41. In addition, you have to have decent credit. You don’t need wonderful credit to get an FHA loan; it just needs to be decent.

If you file for bankruptcy you would have to wait two years to get a benefit loan. You will have to show a good payment history to establish your credit again.

You may find that FHA loans are not for you. An FHA loan may not offer enough money if you need a large mortgage. In addition, the upfront mortgage insurance premium (and ongoing premiums) can cost more than private mortgage insurance.

In many cases, you can still buy a house with a very little down using a standard loan (not an FHA loan). In particular, home buyers with good credit can find competitive offers that beat FHA loans.

Benefit of a FHA loan

You don’t need perfect credit to get it. What it does care about is a record of paying your bills, and paying them on time, for at least the past two years. It will overlook minor lapses on your credit history if there’s a reasonable excuse such as losing a job or serious illness.

But your bill-paying prowess is a critical factor for every application. In the end, the FHA does not have a strict set of rules that determine who gets a mortgage and who doesn’t. An underwriter at the bank, who knows all of the federal rules and regulations governing the FHA program, uses a computer program to analyze your finances and make the call.

You do need at least good credit and no foreclosures, they take three years before FHA will even look at you application. So remember it is all payment history not credit score.

Second Benefit of an FHA Loan

You don’t need a huge down payment to get a FHA loan. You only need a 3% down payment to get the loan. You could even get a private lender to help you with that.

You can get help from these private lenders all so known as DAP’s. They helped millions of people to get a down payment for there FHA loan.

There is a down side to getting a FHA loan. The Mortgage insurance is a lot higher then a regular mortgage. You have to use there insurance to get their loan.

Lets recap, you need to have ok credit not perfect credit to get the loan. You don’t need a large down payment. FHA does have strict rule that you need to follow but they can overlook a few things.

You got expensive insurance at least until you own 20% of the home. You need to have a good payment history to apply.

Buying a new home these days can be quite the task. Homeowners all over the nation are watching as prices are sky-rocketing. With the price of homes rising, it makes it a bit more difficult to pay a 20% or even 15% down payment. This is especially difficult for first time buyers. So what happens if you really can not afford that large of a down payment? Luckily, there are a few options to look at before trying to find the cash.

Many banks will allow you a no-down or low-down payment. This seems like a good idea, but at the same time could end up costing you more money in the end. When you pay little or no down payment, you end up paying a larger monthly payment because you are borrowing more money from the bank.

They also require that you pay for private mortgage insurance (PMI) which protects the lender from loss in case you default your loan. Also, make sure that your rates will not be changing. If your loan has a fixed rate then you will not need to worry. But, if your loan has an adjustable rate and the interest rate goes up, so will your monthly payments. Make sure that you will be able to afford that if the situation arises.

Sometimes buyers purchase a home thinking that if they can not afford their high mortgage payments they will just sell the house and enjoy the equity. This is not a good idea especially when dealing with large sums of money.

Jumping into a mortgage that looks like a “good deal” is never a good thing either. Every day you get offers over the phone, on the internet and in the mail. Make sure that you are looking at all the details before entering into any sort of agreement with them. Especially when they offer little or no down payment. They may seem like good offers at first glance, but most of them will require that you purchase private mortgage insurance and have higher monthly payments.

Before picking out a loan from a lender, you can always take a step back and ask yourself how mucho you can really afford in monthly payments. Try putting a monthly amount away from your paychecks minus your rent. Is it achieveable? Then you are ready to get a mortgage.

Can you save some money for a few months to be able to pay a 15% down payment? What about a 10% down payment? Every little bit will help so try and see what you can do. Paying more up front will make the monthly payments lower and reduce the amount of the overall loan.

Remember that every little bit counts! If you try to save some money every month and it is just not working out, than maybe now is not the time for you to purchase a home. Check out all of your options though. If now is not the time, don’t give up on thinking that you will never own a home.

There are many fees that apply to loans and mortgages. When applying for a mortgage, be prepared to pay some closing costs. These are a bunch of different fees that are all bunched together and called closting costs. Many people assume that these fees are paid to the lender, but that is not true. There are many different fees that go for many different services performed when applying for a loan. We will discuss a few of these but realize that closing costs can consist of many different fees and are not limited to the ones we will list.

• Points— If you have chosen to pay points on your mortgage or if they are set in the loan, be prepared to pay them at the time of closing.

• Escrow deposits for taxes— These are state taxes that vary from state to tax.

• Private mortgage insurance— Some lenders may require that you purchase insurance in case you default on your loan. This insurance usually cost one-half of one percent of the cost of the loan.

• Appraisal fees— These are fees that are set to pay the appraiser who appraises the home. The home must be appraised before the mortgage is given so that the bank can know whether or not the home is good collateral in case the mortgage defaults.

• Property survey— Sometimes loan officers require to have a survey done of the property so that the exact boundaries are correct.

• Loan orginination fees- These are paid to the lender for processing and organizing all of the paperwork.

• Title insurance— The amount is based on the amount of the loan. This is insurance to protect the title just in case someone else claims to own the property.

• Inspections— Expect inspections of the home and a pest inspection. These are normal before closing on a home.

• Homeowners insurance— This is paid for by the home owner to protect their purchase.

• Credit reports— Lenders will run through credit reports to make sure that you are able to pay back the loan.

There are many other fees that can apply when closing on your mortgage. One important thing to remember is that you must pay attention to each individual fee. These fees can be split up into many different ways, going to many different locations. Review all costs with your lender and if you have questions about where the money is going, don’t be afraid to question them. Many people do not consider having so many fees when applying for a mortgage, but every fee has it’s purpose and place.

Don’t be frustrated or concerned about paying so many fees. Just in keep in mind that there are many different things going into purchasing a home. Buying real estate is a large investment for you and the loan officers are taking a chance by lending you the money. Expect the worse when it comes to closing costs and you may be strongly surprised when it all comes down to it. Most closing costs are anywhere from $2500 to $5000 but it depends on a lot of issues.

DTI: Debt-to-Income Ratio

The dictionary meaning is: the ratio of a borrower’s total of debt as a percentage of their total gross income. In this particular article we will be using this term and referring to it as an example relating to mortgages. However, it can be used for almost any loan.

Your debt-to-income ratio is a simple way of showing what percentage of your income is available for a mortgage payment after all other continuing obligations are met; or, the relationship between what you owe and what you make.

Debt is a problem that plagues many of us today. If unmonitored, your debt can grow at an alarming rate and the next thing you know your finances are in shambles. If you want to identify your overall financial situation and keep your debt in check, you need to establish your debt-to-income ratio.

How To Calculate Your Ratio

You will usually see conventional loan debt limits referred to as the 28/36 qualifying ratio (or other numbers up to 36/42 depending on the type of loan). These numbers refer to two percentages that are used to examine two areas of your debt load.

The first number indicates the maximum percentage of your monthly gross income that the lender will allow for housing expenses. This includes loan principal, interest, private mortgage insurance, hazard insurance and property taxes.

The second number refers to the maximum percentage of your monthly gross income the lender allows for your housing, credit cards, car loans and other obligations that will not be paid off within a short period of time (6-10 months).

Items such as monthly food bills, utility bills and entertainment expenses should not be considered when calculating your debt-to-income ratio. These expenses can be paid off monthly.

To calculate your ratio, take your monthly debt payment and divide it by your monthly take home income. The end result is your debt-to-income ratio. Let’s look at an easy example:

Monthly income: $4,000

Monthly debt payment: $1,850

Debt-to-income ratio: $1,850 / $4,000 = 46%

If you have a ratio of 10 percent or less, it means you have a GREAT debt-to-income ratio, meaning your income is quite a bit more than what you owe. However, if you have a debt-to-income ratio of 55 percent or higher, it means you have too much debt and are considered a risk for a mortgage loan.

Debt-to-Income Ratio and Lenders

Lenders calculate and analyze your ratio to determine the size of mortgage you can afford. In fact, these numbers are frequently the most important numbers that lenders look at when quoting you a mortgage amount and interest rate.

These numbers not only determine if you qualify for a mortgage loan, but the monthly payment you will be paying and for how many years. These numbers tell the lender a lot about a person and how they handle their money.

So in the end, the best thing to do is to keep your debt under control and not to take on too much. It could hinder your ability to qualify for your dream home and if not, it would send your finances plummeting.