5 Smart Steps To Getting an FHA Home Loan

Despite today’s economy, even minimum wage workers can achieve the American Dream of homeownership.

The Federal Housing Administration offers you the ability to generally bring the least amount of money to the closing table possible.

Most FHA loans require 3.5% down payment of the purchase price. (Though if you don’t go the FHA route, many loans will require 20% down payment.)

Here are 5 things to know before applying for an FHA home loan

1. You will need to consistently work full-time hours (with the same employer)

Whether you work one job or multiple jobs, be sure you regularly accumulate at least 40 hours per week. A healthy employment history is appealing to lenders. Unearned income such as Social Security benefits and child support may also increase mortgage loan estimates.

Use free online mortgage calculators to figure out how much you can borrow. A full-time minimum wage gross income of $1,160/month, with little or no debt, may qualify you for a mortgage of at least $45,000. With homes selling for significantly less in this buyer’s market, visit popular real estate sites to see exactly how far $45,000 will take you in your area. Depending on location, a $45,000 mortgage may be less than $450/month, including taxes and insurance!

2. Make sure your credit is in order

Debts 2-3 years old may not be accounted for during debt-to-income ratio calculations. This may include broken leases, medical bills, repossessions, etc. Student loans may also be excluded if in active deferment for at least one year.

Educate yourself before speaking with a lender. Know your credit score and review your credit report for accuracy. Resolve any discrepancies immediately. You may obtain a FREE credit report from AnnualCreditReport.com. For a nominal fee, considering purchasing your true FICO credit score from myFICO.com.

3. Consider FHA loans with down payment assistance for possible $0 closing

There are several types of mortgage loans available. However, the Federal Housing Administration’s FHA loan program is designed to help individuals who are credit challenged and low-income. Those with good credit and higher incomes may also apply.

FHA loans require a minimum credit score of 620 (possibly less with some lenders) and a down payment of only 3.5%. So a $45,000 home would require a down payment of $1,575, or only $100 if it’s a HUD home in select states. Closing costs of 3% would be $1,350…unless the seller agrees to pay all or part of the closing costs.

Take advantage of down payment assistance programs, which vary by state, and you may have a $0 closing! For example, the state of Georgia offers the Georgia Dream program which funds up to $7,500. That’s more than enough to cover the down payment, closing costs, escrow reserves, and other miscellaneous fees.

4. Be patient and persistent

Applying for an FHA loan should be free, but definitely no more than $35. An experienced lender should be able to answer any additional questions, provide you with specific details pertaining to any necessary credit building you need to do, and provide a loan estimate of what you could be approved for. The rest is up to you…patience and perseverance are key!

5.  Know that you too can build wealth through homeownership

An individual may purchase a multifamily property up to 4 units with an FHA loan, as long as the property is owner-occupied. The other units may be rented out. Another option is “house flipping.” If you manage to successfully renovate and sell your home for a significant profit, say $65,000, that’s more than enough to purchase 1, maybe even 2 homes, outright in cash throughout many parts of the country or even abroad. The possibilities are endless when you become a homeowner during a buyer’s market.

In conclusion, if you’re stuck working for minimum wage, you can still achieve the American Dream by following a strict financial plan. Good luck!

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