Good afternoon this is Bubba bachelor with Austin’s lender right here in Central Texas this video was designed to help you get a better understanding of what it takes to qualify for an FHA loan and why there’s so many different stories about what FHA really has to offer and what it takes to get qualified so I’ve taken some notes and if you don’t mind I’m going to go through them as we go I don’t want to miss any of the important factors that are going to help you get qualified or you the realtor hope you get your borrower qualified to purchase a new home so we’re going to go over understanding FHA and some of the misconceptions in how to qualify for an FHA home loan FHA is a great option for first-time homebuyers for buyers that have a little bit more debt ratio than is allowed under Fannie Mae or Freddie Mac it even borrowers with less than perfect credit it’s easy to say that FHA is probably the most lenient of all the lending programs out there but it’s important to know that FHA is not a lender FHA is an insurer and they write guidelines and then they give the guidelines to lenders and say if you will approve a loan based on our guidelines we agreed to insure it but you can also put any extra conditions on that you feel are important and that is why it’s very important to know which lender you’re going to go with because every lender is going to underwrite FHA a little bit differently in very few austin’s lender is one of them we underwrite exactly to FHA guidelines allowing more customers to get approved to own a home and be part of the American Dream it’s also good for borrowers with a limited down payment because with FHA you only need three and a half percent down and that actually can come in the form of a gift from a family member or 401k funds so there’s a lot of flexibility with FHA again with FHA the minimum downpayment is three and a half percent if your credit score is over 580 if your credits is between 500 and 579 you would need 10% down plus closing costs again all of that can come from your own funds retirement funds 401k or even a gift from a family member FHA loans are not just for first-time homebuyers they’re also great for people who have again restricted income or they have a high debt ratio or you just are trying to buy a little bit more home than Fannie Mae or Freddie Mac would be willing to give an approval for so here’s what they’re looking for when qualifying for an FHA loan the first thing is verifiable income so there’s two different categories you either have a person who’s employed or a person who’s self-employed and they’re looked at somewhat differently every lender is going to take a complete loan application and run it through an automated underwriting approval system and the underwriting approval system is going to tell that lender exactly what they need in order to verify and get the loan finally closed and approach so if you’re an employed person that means that you go to a job and you get a w-2 in taxes are taken out so your gross income from that job is going to be used to calculate your qualifying income if you’re self-employed that means that you control your own income in your own expenses so they’re going to want to see a two-year average of your tax returns to get qualified so if you’re employed at your w2 if you’re self-employed it’s to your stature terms so you have to be self-employed for at least two years in the same occupation in order to get approval through FHA now if you’re employed that means you get a paycheck in a w-2 you only have to be on your job for six months with a two-year history what that means is if you were a college student and you’ve recently started a job and you’ve been on in six months that’s fine they’re going to ask for a copy of your transcript showing your student and then verify of employment shown that you’ve been employed for two years one of the nice things about FHA if for a first-time homebuyer or somebody just getting started you can also have a non occupying co-borrower so in the old days we used to call them Kitty condos you’re going to go off to the University of Texas or maybe to another school and you want to buy a condo that you can live in all four years but as a student you clearly wouldn’t qualify because you don’t have a regular and recurring income so in that case the loan could go in your name and your parents name assuming you’re over 18 years of age and the loan would be based on your income if you have any your deaths and your parents income and debt so it’s a great way for a person who’s trying to purchase a home to find a family member that’s willing to be a non occupying co-borrower now remember that non occupying Co borrowers credit score their income and their liabilities are all taken into account so finding the right non-occupied code borrower is going to help you substantially in getting approved so really what they’re looking for an income is stability of income they want to make sure that the work history is good as we mentioned two years for self-employed and at least six months on the job if you’re employed you really shouldn’t have more than four jobs in the last two years if you are employed so job stability is very important under FHA shorter work history is accepted but it is underwriters discretion so I really wouldn’t ride that too hard I want to make sure that you do have a good work history the second thing is you want to be able to afford the housing payment in any other debts that you have so what they’re going to do is we’re going to take the house payment plus taxes and insurance plus any other minimum payments that appear in your credit report in all of those combined need to equal in a good rule of thumb is about 50% of your gross monthly income so if your income is $4,000 a month fifty percent would be two thousand and inside of that you should be able to pay the house the taxes insurance if there’s an HOA homeowners association and any other bills that appear at your credit report unfortunately we see some people that go out and get an $800 car payment well unfortunately they’re driving their house so they either have to get a family member to finance the car into their own name or some or maybe even sell a house that just comes down to what’s more important to you that fancy new truck or the boat or having a home that you can live in many lenders say that your debt ratio should not exceed 50% but in all reality FHA does not have a maximum debt to income ratio per the guidelines so when you run into these situations where a lender says oh you have to have a 580 credit score or you have to have a 640 or even a 680 credit score that’s where the lender has imposed additional guidelines on top of the actual FHA guidelines because FHA says you can have a credit score as low as 500 but with a low credit score like that you’re gonna have to have 10% down and you’re just gonna have to be a good story behind why the credit is what it is for example maybe you were part of a hurricane maybe you had a bad accident and the credit report is littered with medical bills so there has to be a compelling reason why you should get approved but it is possible we actually were able to approve a customer with a credit score of 504 so I’m living proof it happens it is very possible but they had a big 401k the guy was a fireman had money in the bank they were putting down I think 20% so there was a good reason why those people deserve and they have a sick job many lenders also said that the housing ratio shouldn’t exceed thirty five percent that is thirty five percent of your income should equal or less than the house payment plus taxes insurance that also is not a hard-and-fast number we’ve been able to get him approved as high as forty and forty five percent so what I’m trying to tell you is there’s a lot of stories on the street and the reason is because lenders impose what they call overlays so even though FHA says they’ll take score as low as 500 some people say no we’re gonna say 580 or maybe 620 or maybe 680 if your credit score is below their self prescribed minimum they’re going to decline your loan so choosing the right lender is more important than anything and I will tell you that here at Austin’s lender we follow the guidelines we go all the way down to a 500 credit score and we have the ability to approve loans that other local lenders are turning down every single day you know how I know it because we do and you know what all the customers say mama why did my realtor send you to me to you first and I good question I don’t know but I’m glad you’re here now so we can get your loan approved another thing is downpayment now with a credit score of 580 and above you only need 3 and a half percent down plus closing costs if the credit score is 579 all the way down to 500 you’re going to need 10% down plus closing costs so you keep hearing me say closing cost what are the closing costs well you have to order an appraisal you also have to establish an escrow account that way the lender can hold taxes and insurance so that at the end of the year the taxes and insurance can be paid for you the size of the escrow account depends on what time of the year you’re buying a home so when you call our office we can go into more detail with you on that but remember the down payment can be a gift from a family member in the down payment itself the three and a half or the 10% has to come from the borrower or a gift from a family member the other closing cost can actually be paid by the seller so let’s say that you find a home that you want to purchase in it’s $300,000 the seller can contribute up to 6% of the sales price for your closing costs remember that down payment has to come from you the closing costs can actually be paid by the seller so let’s pretend that you find a house that you want to purchase and it’s listed in MLS for 310 thousand dollars and you’ve negotiated it down to 300 but you need an extra seven thousand for closing costs so you can write the contract for three hundred and seven thousand with the seller contributing seven thousand they still get their three hundred you agreed upon and seven thousand dollars will go towards your closing costs to reduce your out-of-pocket cash so you can get the home that you truly desire credit is also very important they’re looking for an established credit history generally we’re looking for three trade lines an automobile a credit card something that appears on the credit report for at least twenty four months the minimum allowed is to trade lines and we can use alternative trade lines for example if you’ve paid Allstate insurance or you paid Liberty Mutual and you paid your auto insurance on a regular basis we can use that as a trade line as an acceptable pay history your mobile phone your electric bill your health insurance bill so there are other things that can be used and those are referred to as alternative trade lines and those will allow you the trade lines required in order to fulfill the FHA guidelines we talked about credit score a little bit epic Jaison minimum credit score is five hundred a lot of people are going to tell you five eighty six hundred six twenty six 4680 that’s because they have overlays and let me under hope you understand that a little better if you went to a bank like Chase Wells Fargo Bank of America they’re all regulated by the FDIC the Federal Deposit Insurance Corporation and what they’re doing is making sure that all the people who put money in the bank their money safe so the FDIC says they can’t make a loan to anybody when the credit score below 620 so even though FHA would approve five hundred credit score if you go rolling into the bank with a five ninety three credit score they’re gonna turn you down because your credit score is below their internal set number of 620 some banks say 640 some banks goes like 680 but the actual guideline for FHA is five hundred so choosing the is very important a lot of Realtors don’t understand how important this is they work hard trying to find a customer they get them all lined up they send them to the preferred friend at the bank and the bank turns them down the customer is told that FHA turned him down and that’s not true F actually did not turn them down they were turned down by the bank if they could come to us we’re mortgage brokers and what a mortgage broker does is we sent your loan directly to the investor we know will close in fund your loan so working with a mortgage broker is extremely important because we don’t have those overlays other overlays may be minimum credit score or if you’re going to use a gift letter sometimes they’ll say you have to have three months reserves that is property your payment taxes and insurance whatever it totals let’s say it’s $1,000 then after closing you’d have to have an extra three thousand dollars in the bank that’s an overlay that’s imposed by the lender not FHA so really I can’t stress how important it is to make sure that you use a great lender and I’ll tell you also the lender is great I teach lending and have for the last 25 years we know the guidelines we don’t open a long that won’t close so if you call us at five one two nine five three seven three five nine or visit our website www.investmentpitch.com get higher and they find the perfect home that they can buy for three hundred and they year from now that house is gonna be three thirty so by waiting a year to try and save a quarter on the interest rate they ended up spending thirty thousand dollars more for their home that’s a big mistake if you can qualify for the home by the home you can always refinance it a year or two when you get your credit score increased so the problem is if you go to a lender with overlays and they have a higher minimum credit score or they have additional reserve requirements and you don’t meet those they’re going to turn you down and they’re going to tell you that you were turned down by FHA which again is not true and it infuriates me because people deserve a home they deserve to be part of the American Dream home ownership makes people better citizens better employees better parents it makes children feel more secure so I can’t stress you how important it is to choose the right lender remember FHA is not the lender FHA is the insurer they write the guidelines the lenders follow all lenders don’t follow the exact guidelines they put on overlays I think I beat that to death but I really want you to know how important that is the next thing is a home purchase price FHA has federally set limits on how much you can borrow with an FHA money in it varies by state and by county fortunately the limits are pretty high here in Austin the limit is three hundred and eighty nine thousand eight hundred and fifty dollars that’s the maximum loan amount so that means you can buy a house probably for about four hundred thousand with a little bit of doubt three and a half percent down you’re there so that’s good news FHA does not have income limits some of the other programs you may have heard of home possible or home ready they have income limits again based on County FHA does not have income limit you can make as much as you want and still qualify for an FHA loan which is great news lenders offer a variety of different loans in addition you can to the standard FHA is a 30-year fix you can get a 15-year fixed you can even get an adjustable rate mortgage I don’t suggest that because we know that rates are on the increase so locking in a good rate right now is more important than ever earlier we were talking about the difference between a mortgage broker and a mortgage banker the mortgage banker self imposes some overlays that you have to be able to jump that hurdle to get approved which brokers do not have in addition to the mortgage bankers have layers of management you have the bank and you have a regional manager and an area manager and a branch manager all of those people have to get paid when you go to a mortgage broker you’re getting pure pricing and pure guidelines so I can tell you at Austin’s lender our rates beat the market by almost a full point because we don’t have all the layers of management as a matter of fact we have the guy who teaches mortgage lending for the state of Texas right here our office and that’s about the best thing you can get as a consumer because we’re going to tell you the truth we don’t have to call somebody and ask an underwriter quite often I find myself sending the guidelines to the underwriter telling them no this is what the guideline says please approve my borrowers loan and they always did in the last five years we have not turned in one loan that did not close in fund for the guidelines and we’re really proud of that so the next thing that we want to talk about is the drawback to FHA now if you qualify with a 620 or higher credit score Fannie Mae and Freddie Mac are great options they have a 3% down program they have the home possible program they have the home ready program in their brain options so if the credit score is 620 or higher your lender should automatically look at Fannie Mae or Freddie Mac unless the debt ratios too high because Fannie Mae and Freddie Mac do have a hard and fast rule debt to income ratio cannot exceed 50% it can’t even be one it will not approve the loan so if the debt ratio is a little bit higher if they change your way together if you’ve got a low debt ratio in a credit score over 620 Danny Mae Freddie Mac is going to be the way to go and of course here at Austin’s lender we have those available so we’re here to serve you all the way around now to draw back to FHA is you have to have mortgage insurance now what mortgage insurance is is it’s insurance that in case you default the lender gets help in getting the loan paid off if the house sells at a loss so if you go traditional Fannie Mae Freddie Mac and you 20 percent down which you don’t have to I can’t tell you how many people say oh I’m waiting to my house still have 20 percent down you don’t have to have 20 percent down 3 percent with Fannie Mae Freddie Mac three and a half percent with FHA USDA is zero money down in the same with VA and we offer all of those programs so when you apply in Austin’s lender com we’re going to evaluate your loan application your credit report your ability to prove income and we’re going to put you in the program that is in your best interest it doesn’t make any difference to us we get paid regardless so we want to make sure that you can get the absolute best loan you can excuse me because when we’re finished we’re going to ask you to do a survey and we’re gonna ask you to tell people that we are awesome and that we do what we said we’re going to do we show up on time we say please and thank you and that is what we do with every customer we serve so the only drawback with FHA is you’re borrowing more than 80% of the value and you have mortgage insurance mortgage insurance protects the lender in case the home goes into default to cover any shortage when the house is sold so FHA used to allow you to get rid of the mortgage insurance once the value of your home was 80% where the lum was 80% of the value that changed you can’t do it anymore so the only ready to get rid of the mortgage insurance or you’ve heard it called mi or PMI private mortgage insurance the only way to get rid of that is to refinance your house which is fine not a bad option unless the rates are higher then you wouldn’t want to do with the mortgage insurance ends up being a less expensive thing but even still mortgage insurance is not that expensive and with FHA it’s even a reduced rate to allow you to get along because this is for first-time homebuyers specifically but you don’t have to be a first-time homebuyer so if you think that you are ready to purchase a home I hope you’ll visit our website austin’s lender com if you have any questions you can email me Bubba at Bubba bash or a comp bu VBA at BU B ba ba sh 8 EUCOM we our current market incorporated doing business as Austin’s lender and we loan all over the state of Texas and my partner is in Florida and we loan there as well so visit Austin’s lender or Austin slender calm and begin by clicking on the apply button at the top of the screen once that application comes in we’re going to call you we’re going to fill in any empty areas and we really want to understand from your perspective what’s important to you because at the end of the day if we don’t fulfill your needs and wants we’ve wasted our time and we understand that so thank you for watching this video FHA is the best way to go don’t let anybody tell you 680 or 640 or 620 or even 5 80 credit score FHA approves all the way down to 500 but if you’ve got a lower credit score and I’m gonna say 540 and lower you are gonna have to have a decent downpayment 10% is the minimum probably 15 or 20% down the good news is there are options available and everybody should be a homeowner it’s such a great opportunity because it builds a retirement plan for you if you buy a house today in Austin for 300,000 next year to probably sell for 330 the next year to probably sell for 370 that’s 70 thousand dollars of equity think how long it would take you to save $70,000 in the retirement plan and that money accumulates just by virtue of owning your home now we’ve been in a great market and I hope we stay in a great market but as you know the value of homes goes up and down luckily Austin in Central Texas has been pretty stable but there’s no guarantee of that but I do know that the values always end up higher than they were years past so you may see a short dip but it won’t stay down long it always comes back it always has with that being said thank you for watching Austin’s lender wants your business and we do have one advantage over everybody else we call it our dhoklas system so once you do that application that austin’s lender calm we can click a little button and it sends you an electronic form that you can complete and send back and we will go get your tax returns your pay stubs your w-2s you don’t have to go digging through boxes and storage to try and find all that stuff we’re one of the few lenders that offers that and we have 24-hour underwriting we can close an FHA loan in as little as 10 days and we do it all the time we want your business austin’s lender is your lender

Learn how easy it is to qualify for an FHA home Hint: don’t go to a FHA guidelines allow down to 500 credit score and up to 57 percent debt to income FHA makes the American dream come (512) Texas & SUBSCRIBE to this to know about Bank Statement Loans? Commercial loans? Lender is a division of Curran Mortgage
101 Starboard Ct
AUSTIN, TX 78717
Phone: (512)
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