Cheapest and Best Federal Low Income House Loans Strategy

How to Get a Home Loan Supported by the Federal Government

Owning your own home is one of the best investments you can possibly make but many low-income families can feel like it is an impossibility. Besides from the high repayments there is also a huge down payment that must be fronted up. However, home ownership can be made possible for families on in the lower income brackets with the help of a federal low income house loan.

The Federal Housing Administration (FHA) and it’s Housing Support Program

The FHA is the single greatest hope of lower income families when it comes to home ownership. Provided you can meet their requirements the FHA will insure a lender against the risk of you defaulting on your repayments (resulting in lower rates) and also cover some of the down payment. So how exactly can you get a federal low income house loan from the FHA?

FHA Government Home Loan Requirements – Minimum Credit Scores

Previously credit score requirements were only the concern of banks and other lenders, however, since 2011 the regulations have changed and the FHA now has it’s own set of credit score requirements. The minimum credit rating of people the FHA will accept is now 500. If you do not meet this requirement you cannot receive federal low income house loan from the FHA.

All is not lost, however. It is quite possible to build up your credit score to meet the requirements, given a little bit of time. A few ways you can build up your score are:
– Taking out a small personal loan and paying it off.
– Signing up for a credit card, using it, and then paying it off.
– ‘Renting’ personal goods such as electronics etc.
– Any other debt that you can quickly and easily repay.

All of these will show that you can manage debt correctly and will improve your credit rating over time.

FHA Government Home Loan Requirements – A Down Payment

Although the FHA does require that you be able to make a down payment it is far lower than typical down payments at just 3.5% of the total loan. On a loan of $125,000 that is only a $4,375 down payment. To be eligible for this covered down payment from the FHA you must also meet another requirement. This time you must have a credit score of at least 580. If you are already building up your credit score for the first requirement then it is worthwhile waiting a bit longer and getting a higher credit score to qualify for the down payment coverage as well.

FHA Government Home Loan Requirements – Debt to Equity

A simple debt to income (equity) analysis is the final requirement for approval of an FHA supported government home loan. There are two ratios: the home loan debt to your income, and, your total debt (plus the home loan) to your income. These ratios are 29% and 41%, respectively. To calculate if you meet this requirement do the following:

Add up all of your monthly income then divide it by the monthly repayments that your home loan will have. If your answer is higher than 0.29 (29%) then you will not be eligible. For the second ratio do the same but with all of your monthly debt repayments.

The Only Catch

If you meet all of the requirements then great! But before you continue in applying for your federal low income home loan through the FHA you should first know that you will also be required to manage an up front and monthly premium payments. These premiums cover the FHA insurance. Despite the added payments the entire loan will still end up being much cheaper than a private home loan.

Check Your State-Offered Home Loan Programs!

Finally, before you continue you should check your state government’s websites for any state-funded home loan programs, even if you are eligible for an FHA loan. The terms of your state’s loans may end up being slightly better than an FHA one. For example, in rural states there are sometimes rural home loan programs which can allow you purchase a home for much cheaper.

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