St. Louis FHA 203B – FHA Loan
An FHA 203B loan is the ideal option for a Homebuyer who has less than perfect credit.
Sean Z and his knowledgeable team know the frustration of being turned down for a loan because of a poor credit score. This is why we encourage buyers to take advantage of the Federal Government backed FHA loan which is designed specifically to promote home ownership by accepting mortgage applications from St. Louis residents whose bank considers them too high risk.
What is the FHA 203B Loan?
The Federal Housing Administration (FHA) offers loans that make qualifying easy and require a very small down payment in comparison with other loans. Before you start your home hunt, allow us to help you get the application filled out so that you know ahead of time if you are approved and for how much. Having the peace of mind in knowing that you are already approved for a loan with our TBD mortgage process will take the pressure off of finding your perfect new house.
With an FHA loan, the government is offering a guarantee to the lender that if the borrower fails to pay, they will. With that type of security, a lender is more likely to consider an application from a homebuyer with a bad credit history. With the Federal government offering that type of security, it is easier to qualify for an FHA mortgage.
Besides letting a less than perfect credit score slide, the FHA loan also endorses home ownership by allowing the buyer to make the purchase with down. Plus, they are not interested in where those funds came from. Home ownership is further encouraged by the FHA loan accepting the seller paying a percentage of the buyers closing costs. Your Sean Z mortgage expert will be thrilled to go over all of these details with you as you fill out your TBD mortgage application with him.
With an FHA mortgage you will not be penalized if you pay off the loan amount ahead of schedule. They may also allow you to pass the mortgage to another party if you decide that you want to sell your house before finishing paying off the loan. The buyer picks up where you left off, and you raised your credit score by making timely monthly payments.
Who Qualifies for an FHA 203B loan?
Any potential St. Louis homebuyer is welcome to apply for an FHA loan. Even if you have had a prior foreclosure an FHA loan may still be available for you to purchase a new home. Before you give up thinking that your poor credit history will block any chance of you owning your home talk with a Sean Z mortgage advisor. We work with FHA mortgages all of the time and can tell you before you have a house picked out if you are going to qualify and for how much.
The FHA gears these mortgages towards low income home buyers. That’s not to say a higher income will disqualify you, it just means that the FHA is not turning away people solely based on their income. The debt to income ratio that is required is substantially higher than with other types of loans. You can still qualify, even if the monthly cost of owning a home puts your debt to income ratio close to 50%.
If you don’t already know, the debt to income ratio is a formula developed by lenders to see how much of your monthly paycheck is left over after a monthly mortgage payment, combined with any other debt you may have. This other debt will include monies due to credit card companies, and any other loans.
Sean Z and his team will study your debt to income ratio to see if it is an acceptable amount to the FHA and to give you an idea of how much house you will be able to afford based on that number and the amount of your monthly income.
If you suffered from severe financial hardship in the past, like with a foreclosure, the FHA might even overlook that. If it has been two years or more since your previous mortgage defaulted, let the Sean Z team help you get an application started for a new one.
The biggest concern we hear about when helping to fill out a mortgage application is the dreaded credit score. The FHA will approve funds for potential buyers with credit scores as low as 580 with 3.5% down, or even lower if you have more cash on hand for a larger down payment.
A St. Louis buyer can be approved for an amount that will cover the cost of a almost any home in one of our beautiful neighborhoods up to the FHA loan limit.
How does the FHA mortgage work?
The funding you receive from an FHA loan will actually be coming from a certified lender with the agreement that if you default, the FHA will pay the difference. The buyer will be required to pay an upfront mortgage insurance premium of 1.75% in addition to a small surcharge each month on their mortgage statement. These monies that are collected are what the FHA will use to payback the bank in the event that you default on the mortgage.
You may be wondering why every St. Louis homebuyer doesn’t rush out and get funding for a new house with an FHA 203B loan. The insurance monthly premiums are higher than those found on non-government backed loans. Many St. Louis residents with poor credit use the FHA loan to build their credit scores so that a few years down the line they may qualify to refinance the home for a loan with less monthly fees.
Sean Z and his team will work side by side with you to help you decide which type of FHA loan is best suited for your needs and with your qualifications. Ask us about mortgage funding today and let our TBD mortgage plan let you know how much house you can afford before you see a real estate agent.