The Federal Housing Administration, otherwise known as FHA, provides mortgage insurance on Ohio FHA loans issued by private lenders. FHA is the largest insurer of mortgages in the world! The mortgage insurance issued by FHA provides lenders with protection against losses due to default.
What does this mean to you? Due to the reduced risk to lenders, they are able to lend more money througout Ohio’s 88 counties.
Here are some of the more common questions regarding your eligibility.
Ohio FHA Mortgage Eligibility Overview
First, the basics, in order to obtain an FHA mortgage in Ohio you must:
- occupy the home as your primary residence
- have a down payment of at least 3.5 percent of the purchase price
- be able to afford the monthly payment, as determined by your debt to income ratio
- be able to document a minimum of 24 months of employment history. No it does not need to be with the same employer.
- not have had a bankruptcy in the last 24 months and not had a foreclosure in the last 36 months (determined by the date the property transferred out of your name)
- meet lenders credit requirements, both score and history
Ohio FHA Loan Occupancy Basics
FHA only insures loans for primary residences. That means that you intend to reside in the property, and must move into the home within 60 days of closing.
FHA does insure loans on 2-4 unit properties, as long as you will be occupying one of the units.
Eligible property types for FHA mortgages in Ohio include:
- Single Family Residences – a structure maintained and used as a single dwelling unit. It may share onre or more walls with another dwelling unit.
- Condominium – a building or comples of buildings containing a number of individually owned homes. Owners share in joint ownership of any common grounds, passageways, etc.
- Multi-Unit Properties (up to 4 units) – multiple separate housing units for residential purposes contained within one building.
- Manufactured homes – a mobile home that meets HUD Code, and that is deeded as real estate, not in a mobile home park.
Ohio FHA Mortgage Down Payment Basics
FHA requires a down payment of 3.5 percent for borrowers who have a middle credit score of 580 or higher.
Ohio FHA Debt to Income Ratio Requirements
Your debt to income ratio (DTI) is used to determine whether you can afford the proposed monthly payment on an FHA mortgage.
The “front-end” debt to income ratio is calculated by dividing the proposed monthly payment on the FHA mortgage by your gross (before taxes) monthly income.
The “back-end” debt to income ratio is calculated by dividing the proposed monthly payment on the FHA mortgage PLUS the monthly payment for all debts listed on your credit report by your gross (before taxes) monthly income.
FHA guidelines limit your “front-end” ratio to 31% and your “back-end” ratio to 43%. However, there is some leeway for borrowers who receive an approval through FHA’s automated underwriting system, known as TOTAL Scorecard. TOTAL Scorecard can approve files as high as 56.99% “back-end” ratio.
Ohio FHA Loan Employment History Basics
Generally FHA requires that a lender document a borrower’s most recent 24 months employment history. If you were out of the work force for an extended period of time, and have just returned to the workforce, your loan officer should be able to advise you on the proper documentation that will be required.
Ohio FHA Credit Requirements
One of the main reasons that FHA loans are so popular is that FHA does not require a perfect credit history.
FHA’s guidelines allow for a borrower with a middle credit score as low as 500 to obtain a mortgage. However, lenders often impose stricter guidelines. Most lenders require a 620 or a 640 middle credit score to obtain FHA financing. There are a number of options down to a 580 score as well. Borrower’s whose middle credit score is below a 580 will have a difficult time securing financing.
FHA requires that 24 months has elapsed since the discharge of a Chapter 7 bankruptcy, 36 months since a foreclosure, and no waiting period after a Chapter 13 bankruptcy has been discharged.
To discuss your options with an Ohio FHA Mortgage you can Contact Me or complete the simple, Ohio FHA Rate Quote Request form.
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