The Michigan FHA Loan…
FHA loans are funded by the government to allow home buyers, both first time and recurring, to purchase a new home. Getting one of the Michigan FHA loans has various requirements, since the government insures that the loan will be re-paid if the borrower defaults. As a result, lenders are more willing to lend money for mortgages to people who have the backing of the Federal Housing Administration.
The FHA program was created in 1934 and since its creation; it has provided funding for millions of different single or multi-family homes. There are various requirements you must meet in order to qualify for the available Michigan FHA loans such as having to pay mortgage insurance.
Mortgage insurance is a policy put in place to protect lenders from losses when individuals default on loans. Michigan FHA loans require that borrowers pay 0.85% in monthly mortgage insurance on top of a 1.75% upfront mortgage insurance. This monthly mortgage insurance will be paid for the life of the loan with no cancel-ability.
How much can you borrow with the Michigan FHA loan?
Michigan FHA loan requirements set the amount of money that you can borrow with Michigan FHA loans based on the county of the home and its size. Most counties have a cap of $271,050 on a single family home, although counties with higher costs of living in metro areas may allow higher prices.
Michigan FHA loan requirements also require you to first apply for the loan. You will need to have the address where you live and any previous addresses for the past two years available along with the applicants’ social security numbers. You are also required to submit your employers for the past two years and your monthly salary. Michigan FHA loans require that you also provide your W-2 forms and check stubs along with the value of all personal property that you own.
Michigan FHA loans also require that you analyze your debt-to-income ratio to determine if you can truly afford the home loan. Add the costs of your principal and interest, escrow deposits for property taxes, insurance premiums and homeowner’s association dues and divide that number by your monthly income. The maximum possible ratio you are able to have is 29% in order to qualify for the loan.
The lower ratio indicates it is less costly to you and will cause a smaller strain financially. Add your monthly debts, both revolving and installment,including car loans, personal loans, credit cards and student loans, to that amount. Divide that number by your monthly gross income and you must have a maximum ratio of 41% to qualify.
What are the credit requirements for the Michigan FHA loan?
Your credit must also comply with the Michigan FHA loan requirements. A solid track record of on-time payments with a decent credit history improves your chances of getting approved for an FHA loan in Michigan. A bankruptcy does not immediately make it so you are unable to qualify, but you must be making payments on your debts for at least a year after your discharge date. Late payments are frowned upon, but if a steady length of on-time credit history is established, the Michigan FHA loan requirements may be less stringent. In general, individuals who have had a property that was foreclosed on within the past three years will not qualify for a Michigan FHA loan. All judgments and federal debt delinquencies need to be satisfied before you can be approved for a Michigan FHA loan.