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FHA Loan Requirements
There are certain requirements borrowers must meet to qualify for an FHA loan. You’ll need to meet these requirements:
- A 3.5 percent down payment if your credit score is 580 or higher
- A 10 percent down payment if your credit score is 500-579
- A debt-to-income ratio of 50% or less
- Documented, steady employment and income
- You’ll live in the home as your primary residence
- You have not had a foreclosure in the last three years
FHA Loan Down Payments
An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher. If you can make a 10% down payment, your credit score can be in the 500 – 579 range. A mortgage calculator can help you estimate your monthly payments, and you can see how your down payment amount affects them.
Note that cash down payments can be made with gift assistance for an FHA loan, but they must be well-documented to ensure that the gift assistance is in fact a gift and not a loan in disguise.
FHA Mortgage Insurance
You have to pay a mortgage insurance premium for an FHA loan. Mortgage insurance is to insure your FHA lender against losses if you default on your loan.
In most cases, you pay mortgage insurance for the life of an FHA loan (unless you made a down payment of at least 10%, in which case, MIP would be on the loan for 11 years). FHA loan mortgage insurance is assessed in a couple of different ways. First, an upfront mortgage premium is charged, which normally amounts to 1.75% of your base loan amount.
FHA borrowers also pay an annual mortgage insurance premium, which is based on the term (length) of your mortgage, your loan-to-value (LTV) ratio, your total mortgage amount and the size of your down payment. Annual MIP payments run approximately 0.45% – 1.05% of the base loan amount.
FHA Loans And Credit Score
There are a lot of factors that determine your credit score, including:
- The type of credit you have (credit cards, loans, etc.)
- Credit utilization, which is how much credit you use
- Paying your current bills on time
- The amount you owe on credit cards
- How much credit you’ve taken on recently
A higher score may be able to qualify with a higher debt-to-income ratio (DTI). DTI refers to the percentage of your monthly gross income that goes toward paying debts. Your DTI is your total monthly debt payments divided by your monthly gross income (your monthly income before taxes). This figure is expressed as a percentage.
The FHA states that your monthly mortgage payment should be no more than 31% of your monthly gross income, and that your DTI should not exceed 43% of monthly gross income in certain circumstances if your loan is being manually underwritten. As noted above, if you have a higher credit score, you may be able to qualify with a higher DTI.
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FHA Lending dedicating in helping people like you get the mortgage you need to get into your next home.
Another benefit of an FHA loan is the more flexible credit score requirements. While traditional mortgage lenders may require a higher credit score, the FHA program is designed to help people with less-than-perfect credit still be able to purchase a home. Our team of mortgage experts can help you understand the credit score requirements and work with you to ensure you qualify.
We offer a simple and straightforward application process for FHA loans. You can start by calling one of our Loan Experts at 866-771-0489, and one of our mortgage experts will be able to discuss your options. We offer competitive rates and fees, and our team is dedicated to helping you find the best loan for your unique situation.
Thank you for considering our website for your FHA loan needs. We look forward to helping you make your dream of homeownership a reality.
Let’s Get Started on your FHA loan today!
If you’re in the market for a loan with lenient credit, lower down payment and low-to-moderate income requirements, an FHA loan might be right for you. Start today with FHA lending.