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 when you consider this financing option. Here’s an updated look at Washington State FHA requirements in 2019.
Washington State FHA Loan Requirements in 2018/19
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 the program requirements.
Credit Score Requirements
Consumer credit scores are an important requirement for Washington State FHA loans in 2018/19 Mortgage professionals look at these three-digit numbers as an indicator of how you’ve borrowed and repaid money in the past.
Generally, 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 system ranges 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, lenders require borrowers to show a credit score of 580 or higher to take advantage of the 3.5% down payment option. 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. This means the total loan amount can account for 96.5% of the purchase price.
Here’s some good news for borrowers with limited funds. HUD allows borrowers to obtain down-payment gift funds from family members or other approved donors, 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 314,827 to $679,650 to 1,397,400. 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 allowable loan 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.(SWAP) 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. Borrowers with significant cash reserves an/ or residual income after the mortgage payment has been made, could be allowed to have higher debt ratios. HUD refers to these items as “compensating factors.” structure WC). In addition, if the total FHA loan will produce only 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! Last Updated: