What Do You Need to Qualify for an FHA Loan?

One of the first things a person should realize when seeking an FHA home loan is that the FHA is not leading money directly to you. If you want to qualify for one of these loans, then you will have to submit an application through a conventional mortgage lender – just like you would with any other type of mortgage.

What the FHA does is insure the loan and provide the lender with protection from cases of borrower default. As a result, you have to meet the lender’s guidelines, as well as those that have been set by the Federal Housing Administration.

Because one of the main questions you may have is what is necessary to qualify for this program, you will find the answers here.

Down Payment

According to the current HUD guidelines, you will have to make a down payment of a minimum of 3.5 percent. That is 3.5 percent of the appraised value of the home that you are purchasing, or the actual purchase price – whichever number is less.\

The funds can be received or gifted from a family member, or from another, approved donor. While there are some FHA requirements that have leeway and flexibility built in, the down payment is something you have to have.

Decent Credit

For you to qualify for the down payment of 3.5 percent, you will have to have a credit rating of 580 – or higher. That is the official minimum score that has been established by the Department of Housing and Urban Development.

However, it is important to realize that mortgage lenders can develop their own guidelines in addition to these minimums. This is referred to as an “overlay.“ As a result, you may have to have a higher score if you want to qualify for the FHA loan. Today, most lenders want a credit rate of at least 600 for an FHA borrower.

Manageable Debt

When applying for an FHA loan, a lender is going to need proof of your current income, as well as how much debt you have to ensure you aren’t taking on too much. As a result, you have to have a manageable amount of debt to receive an FHA loan.

According to the official documents, you need a debt-to-income ratio that is no more than 43 percent. However, like with other things, there are some exceptions to the rule.

Steady Income

While this may be obvious, you have to have some type of income in order to be approved for an FHA loan. This is because you have to be able to prove that you can make the mortgage payments every month. Lenders will have to verify your employment and income prior to granting the loan, so be sure to keep this in mind.

A Home Appraisal

If you plan to use an FHA loan for purchasing your home, then you will be required to get a home appraisal. While home inspections aren’t necessary, an appraisal is, so be sure to keep this in mind.

As you can see, being approved for an FHA loan will be dependent on meeting the requirements highlighted above. Your actual lender may also have additional requirements before you receive the funding. Being informed is the best way to ensure that you get the loan you need to purchase the house you want.