FHA Loan Requirements
Your Guide to Secure an FHA Mortgage
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In this guide we will take a closer look at FHA loan requirements and the things you need to know.
The financial world can be a daunting place, especially for first-time homebuyers. But there’s one type of loan that can make the process a little easier: the FHA loan.
FHA loans are mortgages that are insured by the Federal Housing Administration (FHA). This means that the FHA takes on some of the risk if the borrower defaults on the loan, which makes it easier for borrowers with lower credit scores or smaller down payments to qualify.
If you’re considering an FHA loan, here are the essential FHA loan requirements you need to know.
FHA Credit Score Requirements
FHA credit requirements can vary depending on the lender, but most lenders require a minimum credit score of 580 for a 3.5% down payment. If your credit score is between 500 and 579, you may still qualify for an FHA loan, but you will typically need to make a 10% down payment.
To get the best possible interest rate and terms on your FHA loan, it is important to compare offers from multiple lenders. You can use a mortgage comparison website to get quotes from multiple lenders in minutes.
If you have any questions about FHA credit requirements or how to qualify for an FHA loan, please call us at (855) 971-1050 to speak with a loan officer.
FHA Down Payment Requirements
One of the benefits of FHA home loans is the flexible down payment requirements. Depending on your credit score, you may qualify for a down payment as low as 3.5%.
Here is a breakdown of FHA down payment requirements:
- Credit score of 580 or higher: 3.5% down payment
- Credit score between 500 and 579: 10% down payment
It is important to note that FHA lenders are allowed to set their own credit score and down payment requirements, so it is always best to compare offers from multiple lenders before choosing a loan.
Debt-to-Income Ratio (DTI) Requirements
FHA loans typically have a debt-to-income (DTI) ratio requirement of 43%. This means that your total monthly debt payments, including your mortgage payment, should not exceed 43% of your gross monthly income.
However, there are some cases where lenders may accept a higher DTI ratio. For example, if you have a larger down payment or substantial cash reserves, you may be able to qualify for an FHA loan with a DTI ratio of up to 50%.
If you have a DTI ratio that is higher than 43%, you may still be able to qualify for an FHA loan if you have other compensating factors, such as a good credit score, stable employment history, and low monthly housing expenses.
To find out if you qualify for an FHA loan, it is important to speak with a qualified mortgage lender. They can help you assess your financial situation and determine if you are eligible for an FHA loan.
FHA Property Requirements
FHA property requirements are designed to ensure that the home you are purchasing is safe and habitable. The home must be your primary residence and must meet certain minimum property standards, which are evaluated by an FHA-approved appraiser.
Some of the key FHA property requirements include:
- The home must be structurally sound and have a good roof.
- The home must have adequate heating and cooling systems.
- The home must have working plumbing and electrical systems.
- The home must be free of pests and other hazards.
In addition to these general requirements, there are also specific FHA requirements for certain features of the home, such as the kitchen, bathroom, and electrical system.
If you are interested in purchasing an FHA-approved home, you can find a list of FHA-approved appraisers in your area on the FHA website.
FHA Mortgage Insurance Premiums (MIP)
All FHA borrowers are required to pay mortgage insurance premiums (MIP). MIP is a type of insurance that protects the lender in case the borrower defaults on the loan. There are two types of MIP: upfront MIP and annual MIP.
Upfront MIP is a one-time fee that is paid at closing. It can be rolled into the loan, which means that you will not have to pay it out of pocket. Annual MIP is an ongoing fee that is paid each month. It is calculated as a percentage of the outstanding loan balance.
The amount of MIP you pay will vary depending on the size of your loan and your loan term. Generally speaking, the higher your loan amount and the longer your loan term, the higher your MIP will be.
MIP can be a significant expense, but it is important to remember that it helps to make FHA loans more affordable for borrowers with lower credit scores and smaller down payments.
FHA Loan Limits
The FHA sets limits on the dollar amount you can borrow, and these vary by county and are updated annually. Click here to read more about FHA loan limits.
FHA Employment Requirements
FHA employment requirements are designed to ensure that borrowers have a stable income and are able to afford their monthly mortgage payments. Lenders typically want to see at least two years of stable employment history, but some lenders may accept a shorter employment history if the borrower has other compensating factors, such as a large down payment or substantial savings.
In addition to employment history, lenders also consider other factors, such as the borrower’s income, debt-to-income ratio, and credit score. To learn more about FHA employment requirements and to find out if you qualify for an FHA loan, it is important to speak with a qualified mortgage lender.
FHA Occupancy Requirements
All FHA loans must be used to finance the borrower’s primary residence. This means that the borrower must intend to live in the home for at least one year after closing. FHA loans cannot be used to finance investment properties, vacation homes, or second homes.
The FHA primary residence requirement is in place to help ensure that borrowers are able to afford their monthly mortgage payments and that the properties they are purchasing are well-maintained.
If you are considering an FHA loan, it is important to make sure that the property you are purchasing meets the FHA primary residence requirement. You can speak with a qualified mortgage lender to learn more about this requirement and to determine if you qualify for an FHA loan.
Foreclosures and Bankruptcy
If a borrower has gone through a foreclosure, he/she must typically wait three years before getting an FHA loan. Chapter 7 bankruptcy filers usually have to wait two years, while Chapter 13 filers might be eligible after a year, with court approval.
Borrowers must be legal residents of the U.S. and have a valid Social Security number. Certain other documentation might be required for non-U.S. citizens, but they can still qualify.
FHA Home Loans Conclusion
Remember that the exact requirements can vary depending on the lender, as they might have additional criteria or more stringent standards. It’s always a good idea to shop around and discuss your personal circumstances with multiple lenders to get a clear understanding of your eligibility. Moreover, the FHA might update its guidelines from time to time, so you’d also want to consult the official FHA or HUD website or a mortgage professional for the most up-to-date information. That being said if have a question and would like to speak with a LeaderOne Financial loan officer call us now at (855) 971-1050. We are more than happy to answer any FHA loan requirement questions that you might have.