Unlike the adjustable rate mortgage, an FHA fixed rate mortgage has an interest rate that stays the same throughout the entire term of your FHA Loan. Fixed Rate Mortgages are FHA’s most popular type of loan and there are two different types of loan terms to choose from: the 15 year mortgage and the 30 year mortgage. The FHA fixed rate mortgage is also able to finance the following types of residences: single family homes and 2, 3, or 4 unit duplexes.
Note: All FHA loans can be paid off or refinanced at any time. The FHA Streamline is without a doubt the simplest type of FHA Refinance.
Check the FHA Loan Limits to make sure that the loan amount you’re requesting does not exceed your states FHA Loan Limits.
FHA 15 Year Mortgage (180 Month)
The benefit of getting an FHA 15 year loan is that you’re able to payoff the loan in a relatively short amount of time. You’re also able to build equity in your home extremely fast as the principal amount of your mortgage payment usually starts out at about 35% – 40%. The only draw-back of the 15 year mortgage is that your mortgage payments are higher, so if you have a stable income and the cost of your home is small you might want to go with the 15 Year.
FHA 30 Year Mortgage (360 Month)
The 30 year mortgage is the most popular of mortgages simply because the payments are lower by about 50%.
In order to qualify for an FHA fixed rate mortgage, you must fit within the following requirements. One of the main reasons why FHA is so popular is because it does not require a minimum FICO score to qualify.
Existing Debt to Income Ratio
When qualifying for an FHA Loan most lenders will determine your debt to income ratio first. Your debt to income ratio is the amount of monthly payments you are currently paying towards your existing debts. The debt to income ratio requirement for an FHA fixed rate mortgage is 29%. This simply means that your existing debt payment,s before getting your FHA fixed rate mortgage, can not exceed 29% of your monthly income.
Full Debt to Income Ratio
Your full debt to income ratio is considered as the percentage that you’ll be paying after you’ve received your FHA loan. This includes your existing monthly payments, your principal and interest payments, taxes, hazard insurance, and your mortgage insurance premium (MIP). View FHA Mortgage Insurance for more information on what your MIP will be. For all FHA loans your full debt to income ratio may not exceed 43% of your monthly income. For example, if you make $2,500 per month and your mortgage plus all taxes & insurance payments is equal to $850 and you have only 1 other debt with a monthly payment of $100, then your full debt to income ratio will be $850 + $100 =$950 ($950 divided by $2,500 = 38%. You may also view our Debt To Income Ratio page within the FHA Requirements tab.
FHA Requirements state that you must have been employed (preferably with the same employer) for the last two years and your income must show stability or an increase. If you’re a business owner you must be able to show stable income for the last two years as well.
You can not have had a Chapter 7 Bankruptcy within the last two years and if you’ve had a Chapter 13 Bankruptcy you must be able to show proof of on-time payments for at least the last 2 years.
Foreclosures must be at least 3 years old with perfect credit since the foreclosure.