FHA Loan Requirements Make Home Buying Easier

Federal Housing Administration (FHA) Loans are a lot more flexible than many other programs. 

An FHA loan is an affordable way for first-time and repeat home buyers to buy or refinance a home. Since the federal government insures FHA loans, they have no income limits and can be lenient about credit score and debt history, making it possible for home buyers with lower incomes to qualify for mortgages. 

While the requirements for an FHA loan are much more lenient than other loan programs, there are still some factors you need to meet in order to qualify. 

• You must have a minimum down payment of 3.5%. 
• You need a credit score of 580 or higher, whereas for conventional loans the minimum is 620 and even then they would want to see a 20-25% down payment on the property.
• Your debt-to-income ratio can not be higher than 55%, whereas conventional loans say it can’t be higher than 50%.
• The property must be your primary residence.
• The property must be safe, sound, and secure (an appraiser will inspect).
• Loan limits are involved and depend on the county. Most areas are $471,500, but the amount could be higher if you live in a high-cost area.

An FHA loan is not necessarily credit score driven, unlike a typical conventional loan, and therefore is typically recommended for those who have more derogatory type credit. 

The main setback of an FHA loan is the upfront and annual mortgage insurance premiums. These fees are what keep the program operating. On a 30-year mortgage, you would pay an upfront insurance premium of 1.75% of your loan amount, plus 0.85% annually for the life of the loan. If you put down more than 10%, the annual mortgage insurance payments expire after 11 years. 

It’s important to note that not all FHA loans are the same. There are many different types of FHA loans, and the mortgage rates vary depending on the lender. 

The FHA sets minimum eligibility requirements, but then each individual lender can also enforce their own set of guidelines about previous foreclosures in your credit report. This means that you could be turned down for an FHA mortgage by one lender, but then apply with another who may approve your request. This is why it’s important to consider many different lender options when considering an FHA loan. 

Contact our team of reliable and professional loan officers today to determine if an FHA loan is right for you!