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What Are The Qualifications For An FHA Loan?

By Jim Micheals

Tips to help you qualify for an FHA loan.

An FHA backed mortgage is the best option for first time home buyers. FHA lenders are more likely to wholly view your financial situation, rather than dismiss minor discrepancies harshly scrutinized by conventional mortgage lenders. Easy qualification for an FHA loan will have you in your new home within thirty days of the initial loan process.

Credit Score

New FHA guidelines approved in 2010 require a minimum credit score of 580. If your score is lower than 580, you must come up with a 10% down payment. Bankruptcy and foreclosure must be discharged for a certain amount of time as well.

FHA lenders look over your credit and financial history for the two previous years. If you pay your bills on time and show that you are creditworthy, then a lender will take this into consideration.

Employment and Income

FHA lenders will only consider “effective income”, or income that is steadily coming in at or above the amount recorded for the past two years. Part-time employment or job change will not prevent you from a loan. You are best to have less than one month employment gap with a reasonable explanation. If you have a part-time job, a reported income for more than two years is necessary.

Debt-to-Income Ratio

Your DTI, or debt-to-income ratio, weighs your total debt obligations against how much money you earn monthly. As of January 2010, your DTI cannot exceed 45%. This means you cannot pay more than 45% of your income toward monthly obligations. These include:
– Mortgage
–Interest and Taxes
– Insurance
– Other loans such as credit cards, car payments, and student loans

DTI does not include bills such as utilities, electricity, daycare, ect.

Down Payment and Closing Cost

FHA requires only 5% of the purchase price down. If your credit score is lower than FHA guidelines, you may be required to put down as much as 10%.

Related posts:

1. What Are The Qualifications For A First Time Buyers Mortgage Loan?
2. How Does My Credit Score Impact My Ability To Get A Mortgage Loan?
3. What Does A Mortgage Lender Consider When Making A Loan Decision?
4. What Credit Score Do I Need To Qualify For An FHA Home Mortgage Loan?
5. How Does The Mortgage Lender Decide The Max Amount Of Loan I Can Afford?