In Georgia, the FHA loan is a flexible financing option for first-time homebuyers or those with less than perfect credit. With the challenges that many families face-saving for a 20% down payment, the Federal Housing Administration (FHA) requirements can be a way to put a home purchase within reach. The government helps lower the risk to the lender by providing insurance if the borrower defaults on their mortgage. As a result, borrowers will have to make an initial payment for this insurance at the closing, and there will be a monthly MIP fee to keep this insurance in place throughout the life of your loan.
A typical FHA loan program in Georgia consists of lower down payments, typically 3.5%. Homeowners can also use gifts from family, employers, or grant programs to cover their down payment or closing costs under the FHA loan program. The interest rates are fixed, giving homeowners a chance to tap into the current low rates. That interest rate will stay throughout the life of your loan. The seller of the property can also cover up to 6% of the closing costs as part of the purchase agreement conditions.
Many of these options are meant to make the home buying process more affordable for families throughout Georgia. There are loan limits defined by the FHA, but these are based on home values within your county. Our team can help you determine if you qualify for an FHA loan and let you know what those limits will be as part of your application process.
Qualifying for an FHA loan in Georgia is relatively simple. You need to have a FICO credit score of 600 and meet the debt to income ratio. The typical ratio is no greater than 41%. A potential borrower is considered high risk if they have a ratio of 45% or more. Homeowners with a credit score closer to 500 may still qualify for an FHA loan, but they will have to provide a larger down payment, which can be up to 10% or more. If your credit score is low, then take the time to pull your credit report and look for errors. Once those are corrected, it can help to improve your overall credit score.
If you had a foreclosure or bankruptcy on your credit, you would have to maintain a perfect credit score from the event until your mortgage application. Typically, that time period is four years for bankruptcy and five years for a foreclosure.
As part of the qualification process, you will need to provide proof of income and continued employment for the past two years, which can be done in the form of W-2s, check stubs, or tax returns. For those who are self-employed, you may need to provide additional proof of income.
Whereas conventional loans in Georgia typically require you to have cash reserves in place, an FHA loan in Georgia does not require those same cash reserves.