FHA Requirements for Mortgage Loans | FHA Loan Requirements
What are FHA Mortgage Loan Programs?
FHA Mortgage Mortgage Loans (FHA) are government insured loans designed to ease credit requirements to encourage homeownership. These mortgage programs offer lower down payments to purchase homes with lower credit score as low as 550 credit score.
Under FHA mortgage loans have predetermined FHA maximum county loan limits based upon the county the property is located and the number of units.
FHA gives home buyers the ability to purchase homes with only 3.5% down payment unlike conventional programs that require 5% down payments.
What does FHA Government Insured mean?
Mortgage lenders understand that in the event a homeowner no longer can afford to make payments, the lender will loose any dollar amount over 80% the value of the home. As in example, if the home is worth $ 100,000.00 and the homeowner has a loan for $ 85,000.00, when a foreclosure takes place the lender will loose $ 5,000.00.
Therefore, the Government issues a FHA mortgage insurance policy to the lender, whereas they guarantee that the lender will be paid the losses for any losses over 80% the value of the property.
Are there any extra fees or charges for using FHA?
Yes, there are two charges that are placed on all FHA mortgage loans. First, FHA will charge what is called up front mortgage insurance premium currently this is 1.75% multiplied against the loan amount. Second, they will charge what is called monthly mortgage insurance premium which is determined by the loan to value. For most homebuyers this will be .50% or .55% times the loan amount divided by 12 months. Here is an example below:
Example:
Loan Amount: $ 100,000.00
UpFront MIP : $ 1,750.00 ($100,000 x 1.75%)
Monthly MIP: $ 41.67 (($100,000 x .50%)/12)
IMPORTANT: The offset to these insurance charges to cover the increased risk for lower credit scores, and or smaller down payments is that typically FHA interest rates are a lot lower than normal interest rates on conventional mortgage loans.
How long does FHA mortgage insurance last?
It depends on your loan to value on the home, I will explain below.
30 year loans:
If you finance 0-90% the value of the home it will last 11 years
If you finance 90-96.5% the value of the home it will last 30 term
15 year loans:
If you finance 0-90% the value of the home it will last 7 years
If you finance 90-96.5% the value of the home it will last 15 term
What credit score do you need for an FHA loan?
Each lender establishes their own credit score requirement. Most lenders will accept a minimum of a 580 credit score, and require a clean rental history or previous mortgage history for last 12 months. There are other lenders that will work with lower credit scores all the way down to 550 credit score.
What do you need to qualify for FHA loan?
General FHA requirements for loan approval are:
- 2 years of consistent income earnings
- 3.5% down payment for purchase loans
- Zero 30 days late rent or mortgage history for last 12 months
- Sufficient income to afford the house payment and current bills (total payments cannot exceed 48% of monthly income)
- No bankruptcy in last 2 years for chapter 7
- minimal collections
- no judgements
What houses qualify / eligible for FHA loan?
- Single Family Homes
- Manufactured Homes
- Mobile Homes
- Condominiums
- Duplex and Town Homes
- Mult-Family 1 to 4 units
What is the income limit for FHA loans?
There are no income limits. However, FHA does require that your gross monthly income is a little bit more than 50% of all of your monthly bills that show up on your credit report.
What are the minimum down payment for FHA loans?
FHA only requires you to have 3.5% as a down payment. However, lenders have additional requirements for credit scores below 580 as follows:
580-800 Credit score or higher: 3.5% down payment
560-580 Credit score: 10% down payment
550-560 Credit score: 15% down payment
You can get pre-approved with our online pre-approval application in about 3 minutes. We accept credit scores down to 550.
What do you need for FHA pre approval?
To obtain a pre approval you will need to can call up a mortgage lender and provide a full application and credit report. The other option is to use an automated online loan application for instant pre-approvals. Based on our research, the best online pre-approval that represents multiple lenders to get most loans approved with lowest rates is our online pre approval application.
What do I need to apply for FHA loan?
Initially you only need to make contact with a lender or use an online loan pre approval to obtain the initial pre-approval. You just need to provide basic information, income, credit score or credit information and other bills you have.
Once a pre-approval is issued, then it is highly recommended that you send in all of your income documents needed for final verification.
What documents are needed for pre approval or final approval?
- Last 2 years tax returns
- 1 months most recent pay stubs
- 2 months bank statements to verify down payment funds
- Copy of Drivers licenses
- Copy of Social Security Awards letter (if applicable)
- Copy of retirement awards letter (if applicable)
How long does it take to get an FHA loan?
Less than 30 days.
What is a 203k FHA loan?
A 203K FHA loan is a special program that allows you to borrower more than what the home is worth for home improvements. Typically, this program gives you the ability to remodel your home that you own or are purchasing. It requires that you hire a general contractor and they prepare a scope of work and price to complete the work. Then the lender will issue a loan to include the cost of these improvements.
What does a house need to be FHA approved?
The only requirement FHA has is that the property is a residential home between 1-4 units, or condominium, duplex or manufactured or mobile home.
What fico credit score is needed for an FHA loan?
Most all lenders will use the middle credit score of all three credit bureaus (Experian, Transunion, EquiFax)
If you are considering purchasing or refinancing your home, I would like to welcome you to apply online or by calling. We do not charge any application fees, origination fees, and have the most loans approved with the lowest interest rate guarantee.
