The Federal Housing Administration (FHA) loan program has been helping people buy homes since the 1930s. Today, it’s one of the most popular mortgage financing options for Washington State home buyers.
But there are some general criteria you should be aware of, if you’re considering this program. Here’s an updated look at Washington State FHA requirements in 2018.
Washington State FHA Loan Requirements in 2018
Washington State home buyers with good credit, manageable debt, and a down payment of 3.5% could be eligible for an FHA-insured home loan. Let’s take a closer look at these and other program requirements.
Credit Score Requirements
Consumer credit scores are an important requirement for Washington State FHA loans in 2018. Mortgage professionals look at these three-digit numbers as an indicator of how you’ve borrowed and repaid money in the past.
Generally speaking, a higher credit score will increase your chances of FHA loan approval, while a lower score could hurt your chances. The widely used FICO credit score range goes from 300 to 850.
The Department of Housing and Urban Development (HUD) has specific guidelines and requirements regarding credit scores. According to their eligibility guidelines, borrowers need a decision credit score of 580 or higher to take advantage of the 3.5% down payment option. And speaking of down payments…
A Down Payment of 3.5%
The minimum down payment required for a Washington State FHA loan is 3.5%. Specifically, that’s 3.5% of the purchase price or the appraised value, whichever is less. So the mortgage loan can account for 96.5% of the home’s value.
Here’s some good news for borrowers with limited funds. HUD allows borrowers to obtain down-payment funding from a family member or other approved donor, in the form of a gift. The donor must provide a “gift letter” that states they do not expect any form of repayment.
Washington State FHA Loan Limits
There are FHA requirements for the size of the loan as well. In Washington State, FHA loan limits range from $294,515 to $679,650. They vary by county and are based on median home values within each county. That means pricier real estate markets, like those in the Seattle metro area, tend to have higher limits. For more information, see our complete list of Washington State FHA limits.
A debt-to-income (DTI) ratio is a comparison between the amount of money a person earns and the amount he or she spends on monthly recurring debts. Debt ratios are another important requirement for Washington State FHA loans.
Generally speaking, HUD prefers borrowers to have a total or “back-end” debt-to-income ratio no higher than 43%. This means your total monthly debts (including the mortgage payment) should account for no more than 43% of your gross monthly income.
But there’s some leeway here. HUD refers to them as “compensating factors.” Borrowers with significant cash reserves and/or residual income after the mortgage payment has been made could be allowed to have higher debt ratios. Also, if the FHA loan will only produce a minimal increase in housing payments, higher debt ratios might be allowed. So there are exceptions to this rule.
Document & Paperwork Requirements
All mortgage programs require a lot of documents from the borrower, and FHA loans are no exception. Lenders use these documents to verify income, assets and debts, among other things. When applying for an FHA-insured home loan in Washington State, you will be asked to provide bank statements, tax returns, W-2 forms, and other financial documents.
Want to Apply for the Program?
Do you plan to use an FHA loan to buy a home? If so, we can help you. Sammamish Mortgage offers FHA loans for home buyers across Washington State. We have served the Pacific Northwest for more than 20 years. We are a family-owned and operated lender that offers competitive rates backed by solid customer service.
If you’re in the market for a loan, or if you just have questions about the Washington State FHA requirements mentioned above, please contact us today. We look forward to helping you!