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FHA Loan Requirements

Learn Everything You Need to Know About the 2020 FHA Home Loan Requirements
Credit, Employment, Debt-to-Income, Mortgage Insurance, and Property Guidelines.

2020 FHA Loan Requirements

This page covers the basic requirements to get an FHA loan.  This includes the guidelines relating to credit, income, mortgage insurance, and property requirements.

If you would like to see if you qualify for an FHA loan, we can help match you with a mortgage lender.  To have an FHA lender contact you, request to get matched with an FHA lender

FHA Loan Credit Requirements

The FHA requirements for credit refer to a few areas of your credit report which are evaluated to determine the likelihood of having the ability and willingness to repay your FHA loan.  They are related to credit scores, credit depth (trade-lines), derogatory marks, and recent bankruptcies or foreclosures.

  • Credit Score – To qualify for the 3.5% down payment, you must have a 580 credit score or higher. If your credit score is between a 500-579, you still may qualify for an FHA loan, but will be required to put 10% down.
  • Trade-lines – The FHA does not have any specific number of trade-lines that it requires.  As long as you have a little bit of credit history established and demonstrated the ability and willingness to repay past or current debts, your credit should be fine (assuming you have a 620 or higher score, and no major credit issues).
  • No Bankruptcies – In order to qualify for a FHA loan, in most cases, you must have not had a bankruptcy in 2 years.
  • No Foreclosures – In order to qualify for a FHA loan, in most cases, you must have not had a foreclosure in 2 years.

There is a reasonable degree of leniency with FHA loans compared to conventional loans.  If you have a 620 or higher credit score, with no recent foreclosures or bankruptcies, you may meet the credit requirements to get an FHA loan.

Would you like to see if you qualify for an FHA loan?  We can help match you with a mortgage lender that offers FHA loans in your location.

Click here to get matched with an FHA lender

FHA Loan Down Payment Requirements

The minimum down payment requirement for an FHA loan is 3.5%.  If you are approved for a FHA loan, you will automatically be the required down payment.  This money can be borrowed, or received from a down payment assistance program.

  • Example #1:
    Home Purchase Price: $100,000
    Down Payment Requirement: 3.5%
    Total Down Payment Needed: $3,500
  • Example #2:
    Home Purchase Price: $150,000
    Down Payment Requirement: 3.5%
    Total Down Payment Needed: $5,250
  • Example #3:
    Home Purchase Price: $250,000
    Down Payment Requirement: 3.5%
    Total Down Payment Needed: $8,750

If you are eligible for down payment assistance, the FHA will allow you to have up to 3% of your down payment come from a down payment assistance program.  Would you like to see if you are eligible for any down payment assistance programs?  A mortgage lender can help you determine your down payment assistance eligibility.  To have a mortgage lender contact you, request to get matched with a lender.

FHA Loan Debt-to-Income Requirements

The FHA has guidelines regarding how much debt you may have in relation to your income.  These are known as your “debt-to-income ratios” (or “DTI ratios”).  There are two different DTI ratios that an FHA lender will look at.  The first is what percent your mortgage payment will be compared to your monthly income.  This is the “front end ratio”.  The other is how much your total monthly debts are compared to your monthly income.  This is known as the “back end ratio”.

  • Front Ratio – The maximum percentage of your income that your mortgage payment can be is 29%.  This means if you make $4,000/month, the highest mortgage payment you are eligible for is $1,160 (which is 29% of $4,000).
  • Back Ratio – The maximum percentage of your that your total debts can be is 43%.  If you make $4,000 a month, the highest amount of monthly debt payments you may have is $1,720 (which is 43% of $4,000).  This includes your mortgage payment, as well as auto loan payments, credit card payments, and other debts present on your credit report which require a monthly payment.

Want to learn more about FHA Debt-to-Income Requirements?

FHA Loan Property Requirements

FHA loans are available nationwide for 1-4 unit properties, as well as approved townhouses and condominiums.   The primary requirements related to the home you want to purchase have to do with specific property conditions.  The FHA adheres to HUD guidelines related to “minimum property standards“.  These are FHA/HUD rules that require a property to be “safe, security, and sound”.

One of the main reasons that the FHA requires a property to be in good condition is to ensure it has solid resale value.  If a homeowner in an FHA-insured mortgage were to default and foreclose on the property, it would be listed for sale.  The FHA wants to ensure that a property does not have any major structural issues.  The home inspection also will ensure that the home is free of hazards for your safety and the safety of others.

Do you want to learn more about FHA Property Requirements?

FHA Loan Mortgage Insurance Requirements

The FHA requires that all loans carry two types of mortgage insurance premiums (MIP).  This includes both UPMIP and ongoing MIP.  All FHA loans (regardless of lender) require the exact same percentages for both types of mortgage insurance.

  • FHA UPMIP – The Upfront Mortgage Insurance Premium – or UPMIP – is 1.75% of the loan amount.  This is included into the loan amount and financed into the monthly payments.
  • FHA MIP – The regular Mortgage Insurance Premiums – or MIP – is paid monthly.  It is 0.80% of the loan amount and readjusts annually.  It is easiest to calculate both premiums using our calculator, which also has a very useful “how to use this calculator” button which will help clarify how to calculate what you will likely pay in mortgage insurance based on expected loan amount.

To see how much mortgage insurance may cost you based upon your expected loan amount and interest rate, use our FHA Mortgage Insurance Payment Calculator.

Get Matched with an FHA Mortgage Lender

Would you like to see if you qualify for an FHA loan?  We can help match you with a mortgage lender that offers FHA loans in your location.

Click here to get matched with an FHA lender

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