FHA Loans: Your Path to Affordable Homeownership
We’ll help you find the right loan program. If you’re not quite ready, we’ll help get you there.
What Are FHA Loans?
Federal Housing Administration (FHA) loans are designed to help first-time homebuyers and those with less-than-perfect credit achieve the dream of homeownership. Backed by the federal government, these loans offer more lenient credit requirements and lower down payment options compared to conventional loans.
Eligibility Criteria
To qualify for an FHA loan, you must meet the following requirements:
- Credit Score: A minimum credit score of 580 to qualify for the low down payment advantage. Those with credit scores between 500 and 579 may still qualify but must provide a 10% down payment.
- Debt-to-Income Ratio: FHA loans generally allow a maximum DTI of 50%, although 43% is ideal. Exceptions can be made for higher ratios with compensating factors such as a higher credit score or significant cash reserves.
- Employment History: Stable employment or steady income for the past two years.
- Property Standards: The home must meet HUD’s minimum property standards for health and safety during the appraisal process.
- Mortgage Insurance Premiums: FHA loans require an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount and an annual MIP that varies based on the loan term and down payment.
Benefits of FHA Loans
- Low Down Payments: As low as 3.5% for those with a credit score of 580 or higher.
- Flexible Credit Requirements: More forgiving for those with lower credit scores.
- Assumable Mortgage: If you sell your home, the buyer can assume your FHA loan, which could be an attractive selling point if interest rates have risen.
How to Apply for an FHA Loan
- Check Your Credit Score: Ensure your credit score meets the minimum requirements.
- Determine Your Budget: Use our mortgage calculator to understand what you can afford.
- Gather Documentation: Prepare documents such as proof of income, tax returns, and employment verification.
- Find an FHA-Approved Lender: Work with a lender who is approved to offer FHA loans.
- Submit Your Application: Complete the loan application and provide the necessary documentation.
- Complete the Home Appraisal: The home must be appraised by an FHA-approved appraiser to ensure it meets standards.
- Close on Your Loan: Review and sign the loan documents to finalize the process.
