Will I qualify for an FHA loan?

I will be getting laid off in January of 2012, and I will be getting about $12K in severance package (taxes calculated). My plan is to buy a house using the money from my severance package as down payment if I find a new job in January. Will I qualify for an FHA loan? Last time I checked my credit score, I had 620 and I think it's higher now. The house will be from $250K - $300K (I live in Northern California), and I will make at least $50K a year. Will the $12K be enough for down payment and closing costs?

Also, what is a USDA loan, and will I qualify for that? Thanks!

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  • 9 years ago
    Best Answer

    You would qualify for at most, no more than 1875/month for your housing expense or no more than 2000/month for housing and all of your other monthly debts on your credit report (car/student loans/credit card minimums). Since I don't know all of your other debts, I can't answer whether you would qualify. If you have a 500/month car payment, your maximum housing payment is going to be 1500. If you have no other debts, you could go up to 1875.

    On an FHA loan, you would need 3.5% for the down payment. You could request the seller to pay your closing costs. So the minimum needed is 10,500 on a 300,000 purchase. You would need 8750 on a 250,000 purchase.

    Your principal & interest on an FHA 300,000 purchase with 3.5% down is at 1482 at 4.5% interest.

    On a 250,000 purchase your principal & interest is 1234.

    Your PMI/MMI on an FHA 300,000 purchase is 278.

    Your PMI/MMI on an FHA 250,000 purchase is 232.

    Your monthly homeowners insurance is around 90.

    Add all that together and on a 300k purchase your payment is at 1850 + property taxes

    On a 250k purchase your payment is at 1556 + property taxes

    Unless the property taxes are at $400/year, you would not qualify for 300k purchase.

    If you have no other debts and the property taxes are at 3600/year or less, you would qualify for a 250k purchase.

    A USDA loan is for lower income households (if there isn't any one else in your residence that had income, you would qualify for that). It is also only available in more rural areas of the country.

    Here is the link to the map to see if your area qualifies. Click on property eligibility, then click on northern california on the map. Then you click on your county.

    http://eligibility.sc.egov.usda.gov/eligibility/we...

    If you qualify for FHA financing, you would qualify for USDA financing in terms of income/credit/assets.

    Message me if you would like more information.

    Source(s): Mortgage banker for 15 years. Concentrate on government loans - FHA / VA / USDA and first time home buyers. Lend in 49 states. There is still 100% financing available in some areas! Real estate paralegal for 10 years prior to working in mortgages.
  • 4 years ago

    Hi Polittle, If you don't have the down payment for an FHA loan, and can't get the first time homebuyer 2nd mtg Bob mentioned, there is another way to save up the downpayment. I have a couple of friends who did this recently. Your husband can change his paycheck tax withholding to "exempt". Then, save the extra take-home money until you have the down payment. Then, change the withholding back. Basically, you will be borrowing the down payment from the IRS. When taxes are due, you can make arrangements to pay what you owe in installments. It works out to be a really cheap loan, and the IRS is easy to deal with. This won't show on your credit report as any debt owed, as long as you don't default on your payments, which won't become due until after you file taxes next April.

  • 9 years ago

    $50K a year and a $12K down payment will get you a house worth no more than about $160K. At an income of $50K per year, you will only be able to borrow around $150K max. So unless you have $150K in cash, a $300K house just isn't going to happen.

  • 9 years ago

    If you are earning $50K per year, the MOST you can purchase a house for is around $150K (probably more like $125K).

    - the normal amount is 2.5-3x your income.

    USDA loans are in rural areas. Unless you are in North Northern California (way past the bay area), the house will not qualify for a USDA loan.

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