How to Qualify for FHA Loan?
What Requirements Do I Need to Meet to Qualify for an FHA Loan?
Many homeowners just like you choose to get an FHA loan because it’s one of the easiest types of home loans to qualify for, and it requires very little money from you upfront. If you’re wondering what it takes to qualify for FHA, then you’ve come to the right place. In this blog post, we’ll cover the ins and outs of the requirements you’ll need to meet to be approved for FHA loans.
What Credit Score Do I Need to Qualify for an FHA Loan?
FHA loans are available to homebuyers with lower credit scores than those required by convention home loans. This is great for young homebuyers with short credit histories, or homebuyers who’ve recently been working to clean up their credit.
To qualify for an FHA loan, it’s recommended that you have a FICO of at least 580. This will allow you to put down the lowest amount possible as a downpayment – 3.5% of your home’s purchase price.
If your credit score is lower than 580, however, don’t worry. You still may qualify for an FHA loan if your credit score is between 500 and 579 and you can put down at least 10% of your home’s purchase price as a downpayment.
How Much Debt Can I Have to be Approved for an FHA Loan?
When it comes to the requirements to qualify for an FHA loan, your debt history is also important. Mortgage lenders who issue FHA loans will want to see that with your new monthly mortgage payment, you have no more than a 43% debt-to-income ratio.
To calculate your existing debt-to-income ratio without a mortgage:
- Add up the minimum payments due on all your monthly debts, such as your car payment, credit card payments, and student loans.
- Divide your total monthly debt payments by your gross monthly income. This should be the total amount of money you earn every month before deductions like taxes and health insurance premiums are taken out of your paychecks.
- The resulting number will be your current debt-to-income ratio.
What Are the Other Requirements to Qualify for an FHA Loan?
In addition to meeting the above-listed credit score and debt-to-income ratio limits, to qualify for an FHA loan you’ll need to:
- Prove that you have regular and steady employment. This can be done during underwriting by having the underwriter contact your place of employment to confirm your employment status and duration. If you’re self-employed, you’ll need to provide a minimum of two years worth of tax returns to prove your annual self-employment income
- Use the home you are financing with an FHA loan as your primary residence.
- Pay Private Mortgage Insurance (PMI) as part of your overall monthly mortgage payment to your lender.
*Find a Lender for an FHA Loan
If you meet the above qualifications, that’s great news! You’re ready to buy your dream home with an FHA loan. To find a lender, fill out our online quote form. The lender you’re matched with will reach out directly to you to get the mortgage application process started.
