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FHA & Affordable Home Loans - Part 2

The application process (Continued)
During the application process

Make yourself quickly available and be ready to supply the requested documents or information.

Make your case, but don't fight it too hard. While it's good to try to make a case for what you believe you can afford, the FHA will ultimately decide what you can or cannot do. Your creditworthiness and income will play a huge factor in this.

Don't fall in love with your first choice home. The home you love may simply be out of reach. Be willing to accept a home that may not be your first choice in a location that may be your desired neighborhood. However, if you're not happy with your options based on what the FHA is willing to offer you, it's okay to wait until your income and credit are in a better position.

Be prepared to shop for the best lender and rates. Remember that the FHA will not be the one lending you money. You will need to find FHA-approved lenders. The FHA will only determine how much of a loan they are willing to insure, which will also determine what the lender is willing to let you borrow. Many lenders will offer different rates, so do your research during the process to find a good, trustworthy lender.

After the process

Once both the FHA and the lender have approved your application, be sure to update both if your income situation changes. If your credit gets better or your income improves, you may be able to alter the terms of your loan and secure a better rate. If your income drops, inform the FHA and your lender immediately. They will help you to stay in your home and stay current on your payments.

The FHA has a separate program to assist homeowners with needed repairs. These “203(k)” loans are separate from your mortgage and can be used to make non-structural repairs to the home. The FHA will let you borrow an amount based on the value of the home after the repairs but will limit the amount to about $35,000.

Alternative Low-Income Loan Programs
Looking for alternatives? There are a few options available to you.

The USDA Single Family Housing Direct Home Loan Program (502 Direct Loan Program) designed for low-income individuals seeking to purchase homes in rural regions of the country. The USDA provides these loans with no down payment required.

The Single Family Housing Guaranteed Loan Program is also administered by the USDA. It allows individuals to purchase land to build homes, or to rehabilitate a home. It also provides money to move an existing home to a rural location.

VA Home Loans are provided by the Veterans Administration to military veterans at very low-cost rates. These loans are also designed to ensure low monthly payments.

The Fannie Mae HomeReady Program aims to allow low and moderate-income individuals to obtain mortgages more easily. Fannie Mae considers your credit score but places a higher priority on your income. Fannie Mae puts income at a higher priority than debt to allow higher debt-to-income ratios to qualify, including those with DTIs over 45% to 50%.

A low income and a poor credit score do make it hard to buy a house. Your options will be limited, and there will be burdensome requirements. In many cases, families need to spend some time saving money and improving their credit score before it is practical to make a serious bid for a home. That takes patience, but it's also an opportunity to learn and practice vital financial skills: financial discipline will serve you well after you buy your home as well! With effort and persistence, you can achieve your goal!