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FHA Loan Requirements

Home loans insured by the Federal Housing Administration are expected to meet standards set by the government. Find out which requirements you meet.

FHA home loans, which are insured by the Federal Housing Administration, are an affordable home loan solution for cash-strapped buyers. These loans have helped many people refinance and become homeowners. But there are a few misconceptions about how FHA mortgage loans work.

FHA Loan Requirements for 2020

Approval for an FHA home loan requires consistent income and at least 24 consecutive months of steady employment. Preferably with the same employer. FHA home loans are available for primary residences only. This includes single-family homes, townhomes, condos and manufactured homes. The FHA lender will send an appraiser to the property to ensure it meets appraisal standards before loan approval.

THE BASICS OF THE FHA LOAN

What is a FHA loan?

An FHA home loan is a government-backed mortgage. It is available to first-time home buyers and repeat buyers. These home loans are an attractive product because they have a lower minimum credit score requirement compared to other mortgage loans. FHA mortgages also have low minimum down payments. There are no income limits for an FHA home loan, making them accessible to all. You can choose between a fixed-rate or an adjustable-rate loan.

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How Do FHA Loans Work?

The Federal Housing Administration doesn’t issue FHA home loans. To get a loan, you must use an FHA-approved mortgage lender. Your mortgage lender will review your home loan application and supporting documentation. This is to ensure that your employment history, debt-to-income ratio and credit history meet the minimum loan requirements for approval.

FHA Loan Low Down Payment

FHA down payments are lower than the down payment on a standard conventional home loan. Borrowers with a minimum credit score between 580 and 620 can get an FHA home loan with as little as 3.5% down. Borrowers with credit scores between 500 and 579 can get a loan with a down payment as low as 10%.

Benefits of an FHA Home Loan

FHA home loans are easier to get than conventional home loans. This is because they allow for lower FICO scores. The minimum credit score for a conventional loan is typically 620. You can get an FHA home loan with a credit score as low as 500 to 580. Always check your credit report before applying for a loan.

FHA home loans are sometimes a better choice after a bankruptcy or foreclosure. You can get an FHA loan two years after bankruptcy, and three years after a foreclosure.

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FHA Debt-to-Income Requirements

Mortgage lenders also calculate a borrower’s debt-to-income ratio (DTI) when determining eligibility for an FHA home loan. DTI ratio is the percentage of your monthly income that goes toward debt payments. Typically, a borrower’s DTI (including the mortgage payment) for an FHA home loan cannot exceed 43%.

Therefore, high credit card debt, auto loans and student loans can make it harder for some people to get approved. Paying down your monthly debt before applying for a mortgage can help put your DTI within an FHA loan requirement.

Get Your DTI Calculated by a Loan Expert

FHA Loan Income Requirements

There isn’t a maximum or minimum income requirement for an FHA home loan. However, these loan programs typically require that borrowers spend no more than 31% of their gross monthly income on a house payment.

FHA Documentation

After completing your application for an FHA home loan, you’ll submit supporting documentation to the lender. Mortgage lenders must verify employment, income and assets. You're required to provide your W-2, most recent paycheck stubs and tax returns for the past two years. You must also submit bank statements from the past few months. Depending on your circumstances, you may be asked to provide additional documentation to complete your loan file.

Applying for an FHA Home Loan

To start an application for an FHA home loan, the first step is to find an FHA-approved lender. Our team is highly experienced with FHA loans. We’re ready to answer your questions about down payment requirements, credit requirements, mortgage rates and property requirements.

Find Your Loan Expert