FHA Home Loan Requirements

01/14/2023

Many people believe that homeownership is completely out of reach. But the truth is that even with a low credit score or the inability to save for a hefty down payment, you can still buy a house you love.
If you would like to purchase a home but are struggling with credit or savings, an FHA loan may be right for you. Read on to learn more about FHA loan requirements.

FHA Home Loan Requirements - USA Mortgage

FHA stands for the Federal Housing Administration. FHA loans are created for low-to-moderate income earners who may not otherwise be able to purchase a home. With these loans, you will technically receive a mortgage from a lending institution, not the FHA itself.


FHA Loan Limits for 2024


The FHA has maximum lending limits in place, but the limits change depending on where you are planning to purchase your home. Below is a breakdown of the limits you can expect to encounter.

Low-cost areas:

  • One-Unit: $498,257
  • Two-unit: $637,950

High-cost areas:

  • One-Unit: $1,149,825
  • Two-unit: $1,472,250

FHA Down Payment Requirements


If your credit score is above 580, you are only required to put down a 3.5% down payment. Lower credit scores secure a 10% down payment. These numbers are lower than most mortgage programs, but even so, they can be hard to save for. This is why the FHA allows you to combine your FHA loan with a down payment assistance program. Ask your loan officer for guidance in finding the right down payment assistance program for you.


FHA Loan Credit Requirements


If your credit score is at least 500, you are eligible for an FHA loan. If your credit score falls between 500 and 579 you can receive a loan as long as you can put 10% down. If your credit score is above 580 you can secure a loan with a down payment as low as 3.5%.

Credit Issues

FHA loans are more forgiving than the traditional Conventional loans. If you don’t have a credit history, FHA allows for the use of non-traditional credit options. The lender will take a look at payment history of items utility bills, rent, car insurance payments, etc. A previous bankruptcy or foreclosure won’t disqualify you from receiving an FHA loan. However, you must be out of bankruptcy for at least two years, and your foreclosure must have been over three years ago.


FHA Loan DTI Ratio Requirements


FHA loans take into account your debt-to-income ratio (DTI). Each Lender has different overlays for their DTI requirements but at USA Mortgage we don’t have any overlays on the DTI for an FHA loan. You are allowed to have up to a 57% DTI for an FHA loan. Not sure what your DTI is? Use an online calculator to give you an idea of your personal DTI.


FHA Mortgage Insurance


Instead of private mortgage insurance, FHA loans require an Up Front Mortgage Insurance Premium (UFMIP) and a monthly mortgage insurance premium (MIP). UFMIP is a one-time payment made at closing that can be rolled into the loan. MIP is paid monthly along with your mortgage and may be required for either 11 years or the lifetime of the loan. UFMIP and MIP amounts vary depending on the loan to value (LTV) and how long your loan is for, so it’s important to consult with your lender for more details on these insurance requirements.

Does the FHA loan program sound like a good fit for you? If so, let us know. We’d love to work with you through the lending process.


FAQs about FHA Home Loan Requirements


What are the debt-to-income (DTI) ratio requirements for an FHA loan?

FHA loans consider your debt-to-income (DTI) ratio when determining eligibility. At USA Mortgage, there are no specific overlays on DTI for FHA loans, allowing for a maximum DTI of up to 57%. This flexibility helps more borrowers qualify for an FHA loan, even if they have higher levels of existing debt. You can use an online calculator to estimate your personal DTI ratio.

Can I get an FHA loan if I have a history of bankruptcy or foreclosure?

Yes, you can still qualify for an FHA loan if you have a history of bankruptcy or foreclosure, provided certain conditions are met. For Chapter 7 bankruptcy, you must wait at least two years after the discharge date, and for Chapter 13 bankruptcy, you must have made timely payments for 12 months with court approval. If your home was foreclosed upon, you must wait three years from the application date before qualifying for an FHA loan. This flexibility makes FHA loans accessible to borrowers who are working to rebuild their credit.

What credit score do I need to qualify for an FHA loan?

To qualify for an FHA loan, you need a minimum credit score of 500. If your score falls between 500 and 579, you must make a 10% down payment. For those with scores of 580 and above, a down payment of only 3.5% is required. FHA loans are more lenient with credit issues compared to conventional loans, and they allow the use of non-traditional credit options like utility bills and rent payments to establish creditworthiness.

USA Mortgage Abadi Region

USA Mortgage Abadi Region

A full-service mortgage lender with local branches in Missouri, Arkansas, Illinois, and nearby areas.