How to Qualifiy for an FHA Assumable Mortgage Program
The Federal Housing Authority, or FHA, is a federal agency that helps people who are unable to qualify for conventional mortgage loans. The FHA does not grant mortgage loans directly. Instead, it insures mortgage loans made by FHA-approved lenders to home buyers. FHA mortgage loans can be assumable by other buyers if those assuming the loans meet FHA's standard requirements.
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Things You'll Need
- FHA-approved lenders
- Mortgage loan application
- Pay stubs
- Federal tax returns
- Monthly debts and account numbers
- Home purchase agreement
- Verification of deposit
Instructions
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Demonstrate your eligibility to a potential lender by presenting a valid Social Security card or green card and showing that the purchase is for a primary residence (defined as a single-family home, condo or townhouse) or an income property of no more than four units.
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Present the lender with at least two years of verifiable employment history. This employment does not have to be with the same employer. You must also obtain written employment verification from your current employer that states that your employment is expected to continue, uninterrupted, for the next three years.
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Provide pay stubs from your current employer, evidence of other income such as Social Security, retirement income, child support or alimony, and income verification from any part-time or secondary employment for the previous two years in order to prove that you meet the FHA's income requirements for the loan you want to assume. Also, provide verification of all commission-type income, if any, which will be averaged over the last two years. Provide evidence of any Veterans Administration or Social Security benefits or other payments from a government agency.
Self-employed individuals need to submit two years of signed federal tax returns. Family business employees must verify their income with pay stubs as well as a Statement of Percentage of Ownership of the family enterprise.
If you need a co-borrower, be aware that the co-borrower is subject to the same requirements.
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Ensure that your monthly credit obligations do not exceed 43 percent of your gross monthly income. Also, if purchasing a four-unit or less income property, you must provide evidence of funds on deposit to service at least three months of debt. Additionally, you must have a satisfactory credit rating for two years. If you do not have established credit, you must present proof of a successful payment history for debts such as rent, utilities and installment debts for the previous 12 months.
If you have any accounts in collections, be aware that the lender may require you to reduce or pay off these accounts. Also, pay off all civil judgments prior to seeking loan funding.
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Make sure you have a down payment of at least 3 percent of the property's purchase price. You also must provide financial verification of your down payment funds.
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Tips & Warnings
Multi-unit dwellings must be owner-occupied in order to qualify for FHA-approved lending.
No lender/broker should ever require you to pay an upfront fee to apply for a loan.
Resources
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