How do I apply for an FHA loan?

An FHA mortgage is a great way to buy a house without needing a big down payment or perfect credit score.

While they’re backed by the federal government, FHA mortgages are available from just about any private lender. So it’s easy to apply and shop around for low rates.

You can start your application online and even close online in some cases. Or you can work one-on-one with a loan officer for extra guidance. You get to choose your lender and how you want to apply.

In this artic (Skip to…) 

• Steps to apply for an FHA loan
• What documents do I need?
• Requirements to get approved
• What happens after you apply?
• Where can I apply?
• Start your FHA loan application

You can get FHA financing from banks, mortgage companies, credit unions, and online lenders. You can also use our review of the best FHA lenders as a starting point.

The right lender for you will depend on a few things. For instance, if you have a lower credit score, you want to make sure your lender accepts FHA’s minimum of 580 (some lenders set the bar at 600 or higher).

You should also think about how you want to work with your lender. Do you prefer person-to-person interactions? Look for a local lender that focuses on in-person and over-the-phone lending.

If you prefer to go it alone, on the other hand, there are a wide variety of lenders that will let you complete most or all of the mortgage process online.

2. Apply for a loan

After finding a lender, the next step is to submit a loan application.

Many lenders let you apply online, though some will connect you with a loan officer to complete your application over the phone or via email.

Since mortgage terms and rates can vary from one lender to the next, you should contact multiple lenders to compare offers. This helps you find the best deal.

Ideally, you should request quotes from three to four lenders so you know you’re getting the best interest rate and lowest fees available to you. 

Lenders will typically check your credit before providing rate information and issuing a pre-approval. But don’t worry too much about the effect on your score.

As long as you submit all your mortgage loan applications within a 45-day window, they’ll be reported as a single credit inquiry on your credit report, so your score won’t be dinged multiple times.

3. Provide basic details

Lenders will need basic personal information and property details to start your mortgage application.

When you initially apply for an FHA loan, be prepared to provide:

• Your full name
• Your Social Security Number
• A copy of your driver’s license or other state-approved ID
• Income information
• Employment history
• The property address
• Purchase price of the property
• Down payment amount

Once you’ve provided these basic pieces of information, the lender will request supporting financial documents to verify your income, savings, and debts. You can see a list of supporting documents you’ll be asked for below.

4. Compare Loan Estimates

After you submit a loan application, the lender must provide a Loan Estimate within three business days. 

The Loan Estimate (LE) is a standard form used by all lenders. It’s designed to keep the loan process transparent by providing information about a borrower’s estimated interest rate, monthly mortgage payments, and closing costs upfront. 

The LE also provides information on the loan type and loan term, so you know you’re comparing mortgage offers on equal footing. (For instance, an FHA loan with a 15-year term would have much higher payments than one with the same loan amount and a 30-year term.)

Make sure all your loan offers are quoting the same loan type, loan term, and loan amount. Then compare interest rates, annual percentage rates (APR), and upfront fees to find the best deal.

• Tax returns from the past two years 
• W2s from the past two years
• Bank statements from the previous 60 days 
• Financial statements for other assets (investment accounts and retirement accounts) 
• Recent paycheck stubs
• Proof of other income such as Social Security or disability income
• Name and address of your employers over the previous two years
• Year-to-date Profit and Loss statement, if you’re self-employed

The lender will also pull your credit score and credit reports. Authorizing a credit check allows the lender to view your credit history and verify your current debt load and minimum monthly payments. 

• Credit score — FHA home loans require a minimum FICO score between 500 and 580. (Most lenders require at least 580.) By comparison, a conventional mortgage requires at least a 620 FICO score
• Credit history — You’re typically allowed no more than one 30-day late payment within the past 12 months. In addition, you shouldn’t have a foreclosure in the past 3 years or a recent bankruptcy
• Down payment — FHA loans require a minimum down payment of 3.5% if your credit score is 580 or higher. If your credit score is between 500 and 579, you’ll need a minimum down payment of 10%
• Loan-to-value ratio (LTV) — LTV compares your loan amount to the home’s market value. This is another way to express down payment requirements; since at least 3.5% of the purchase price is required as a down payment, your loan-to-value ratio must be 96.5% or lower
• Closing costs — You’re also responsible for closing costs, which are lender and third-party fees. Closing costs vary by location, but typically range between 2% and 5% of the loan amount. This expense is your down payment, so you need to budget for both amounts
• Debt-to-income ratio (DTI) — Your DTI ratio is the percentage of your gross monthly income that goes toward monthly debt payments for things like student loans and credit cards. For an FHA loan, your DTI ratio typically shouldn’t exceed 45%. Lenders might allow a higher DTI if you have compensating factors such as an exceptional credit score or large cash reserves. Typically, you’re allowed to spend up to 31% of your gross monthly income on the house payment

The home you plan to buy needs to meet eligibility requirements, too.

For instance, the home must be a primary residence, meaning you plan to live there full time. It can be a single-family property or a multi-family home with up to 4 units (as long as you live in one yourself).

And your loan amount can’t exceed current FHA loan limits, which are $356,362 in most areas but higher in certain high-cost housing markets.

You should also schedule a home inspection after getting a purchase agreement. A home inspection isn’t required for loan approval, but it’s recommended because it can reveal hidden issues with the property.

If your offer was subject to a satisfactory home inspection, you can ask the seller to correct these issues before closing.

During the underwriting process, your lender might request additional information. Don’t panic — this is common when getting a mortgage.

For example, if your parents will gift your down payment and/or closing costs, your lender will request a gift letter. Or if you receive alimony payments, the lender might ask to see a copy of your divorce decree. 

Submit requested information as soon as possible to keep closing on schedule.

To find a good FHA lender, you can get recommendations from friends or family who’ve used an FHA loan. You can also check with the Better Business Bureau to review a bank or mortgage lender’s rating and read online reviews. 

Keep in mind that credit requirements for FHA loans vary from lender to lender. While many lenders allow a credit score as low as 580, some might set their minimum at 600 or even higher. So if your score is on the lower end of qualifying for an FHA loan you might need to shop around a little more.

Regardless of credit score, you should find three lenders you like the look of and apply with them.

FHA mortgage rates can vary a lot between lenders, and you won’t know which one can offer you the best deal until you’ve seen personalized quotes.

Verify your new rate (Mar 17th, 2021)