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FHA loans exist to help people especially first-time homebuyers or those with past credit issues get into homeownership.
FHA loans typically have fewer requirements than conventional mortgages.
This means you could potentially qualify even with a lower credit score or a smaller down payment.
Learn more about FHA loan requirements, loan limits and how these loans can help you get into homeownership.
FHA Loan Requirements
The Federal Housing Administration insures FHA loans, making these loans easier to get.
However, the FHA does not issue these loans.
Youll still need to go through a lender to apply.
Since every lender is different, FHA home loan requirements may vary.
That said, these are the typical requirements for an FHA loan.
Credit Score Requirements
Your credit score affects your loan eligibility.
Typically, the better your score is, the higher your approval odds.
Your FICO credit score ranges from 300 to 850.
FHA loans require a minimum down payment of either 3.5% or 10%, depending on credit score.
you might use your personal savings for a down payment.
Your lender may have different requirements.
The lower your DTI, the better since a lower percentage indicates your ability to pay back your debts.
If your DTI ratio is too high, you might not get approved for an FHA loan.
Generally, your DTI should be no higher than 43%.
A higher DTI may be acceptable if you have sufficient income or meet additional lender requirements.
This typically means having at least 2 years worth of consistent employment.
Acceptable forms of income vary, but may include:
Youll also need to provide proof of sufficient income.
This varies by lender and how much you oughta borrow (loan amount).
MIP lowers the risk to the lender, but can increase your monthly payments and closing costs.
Mortgage insurance includes:
MIP costs the same amount regardless of credit score.
However, you may have to pay a little more if you put less than 5% down.
An appraisal may be required to ensure the property complies with current building codes.
FHA loans also have a maximum mortgage limit.
The current loan limit for a one-unit property is $524,225 to $1,209,750.
Heres how to qualify, including a step-by-step program process and the documents youll need when applying.
But there are a few drawbacks as well as advantages to getting one of these loans.
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