What is an Ohio FHA Loan?
An Ohio FHA loan is Ohio’s version of an FHA loan: a uniquely accessible home loan, ideal for first time home buyers. FHA loans are low-risk for lenders because they are given on the condition that, if the borrower fails to make a payment, the Federal Housing Administration (FHA), or the US Department of Housing and Urban Development (HUD), will lend help. This government backing makes lenders more readily accept applicants, and so the latter are still eligible even if lacking good credit. Some benefits of an FHA loan include minimal down-payments, down-payments that can be made by a friend or family member, and accessibility to individuals who in the past have filed for bankruptcy or settle foreclosures. Below, we at Online Loans have broken down the assorted information available across the web into a convenient need-to-know to make getting you FHA loan as simple as possible. Our mortgage calculator can also help to determine just how much your home loan will cost you all together.
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Requirements for FHA loans are quite lenient because lenders have a guarantee by the government to help in the event of a default. Down-payments for borrowers with a credit rating of 580 are only 3.5%, while borrowers with even lower ratings can still be eligible provided they make a down-payment of 10%. FHA loans also allow credit-report entries to be 30 days late. Similarly, while most conventional loans ask for a debt-to-income ratio of no more than 28%, FHA applications generally allow for DTI’s of 31%. In some cases, DTI’s can be as high as 40%, though this will likely entail other conditions to be less lenient, i.e., larger down-payments, premiums, interest rates, etc.
As for credit history, FHA loans are open even to applicants who have in the past filed for bankruptcy or foreclosures on previous loans. All that is generally required in this cases is to show that such events were caused by extenuating circumstances, and that a certain length of times has passed since the events. In the case of bankruptcy, it is generally expected that applicants will have been financially stable for a period of two years, while two-three years is generally expected to have passed since settling any foreclosures. That said, even these details can fluctuate from loan to loan, depending on other circumstances, such as other details of the borrower’s financial status, or other details regarding the payment stipulations. In Ohio, FHA applicants who wish to purchase a home are required to have at least (two years of steady income), intend to oc cupy the property, and provide a property appraisal assuring that health and safety codes are met.
FHA loan interest rates will be different for each loan. That is, rates are not determined according to some standard among FHA loans, but rather according to various criteria in regards to the borrower’s financial history and status, as well the nature of the loan itself. Shorter loans, for example, will tend to have higher rates, while an applicant’s having better credit ratings and financial stability will tend to lower rates (for tips on keeping your credit score high, check out our credit rebuilding guide).