What Are Some FHA Loan Requirements?
Getting approved for a traditional mortgage to buy a home can seem far-fetched to many, given the financial requirements involved. The Federal Housing Administration of the U.S. Department of Housing and Urban Development seeks to make it easier through various loan programs designed to open the dream of homeownership to everyone.
FHA loans target borrowers who might not be able to qualify for traditional mortgages, such as people with lower incomes, poor credit scores, or other financial difficulties. What does it take to get approved for an FHA loan, and what are the basic FHA loan requirements?
Basic FHA Loan Requirements
FHA loan programs recognize the importance of homeownership in building a successful life, so the agency provides guarantees to FHA loan lenders that remove some of the risks of default. In doing so, the loans become open to people with a broader set of circumstances.
At a basic level, to qualify for an FHA loan you must:
- Pay private mortgage insurance (PMI), also known as the mortgage insurance premium.
- Have a credit score of at least 580 to qualify for the lowest interest rate. You can still qualify for an FHA loan with a lower credit score, but you will pay a higher interest rate and be required to provide a larger down payment.
- Keep your debt-to-income ratio below 43%.
- Use the home as your primary residence.
- Show proof of steady income and current employment.
Other Characteristics of FHA Loans
A recent bankruptcy on your record typically disqualifies you from a traditional mortgage for at least seven years. This isn’t the case with FHA loans. If your bankruptcy was within the last two years, you might be able to qualify for an FHA loan if you meet the other requirements. You may also be able to obtain an FHA loan if you have experienced foreclosure on a prior house, but it depends on the circumstances. The team at Supreme Lending of Houston can help determine your eligibility.
FHA loans typically offer terms with lower down payments. If your credit score exceeds 580, you may be able to get a loan at the lowest possible interest rate, which during 2022 stood at 3.5%. Lower credit scores correlate to higher interest rates that may reach 10%. The FHA sets loan limits each year for each county in each state, based on population income. In 2022, the FHA guaranteed single-family homes in most counties in Texas up to $420,680.
Find Your FHA Loan With Supreme Lending
Understanding FHA loan requirements can help when it comes time to pursue the home project of your dreams. Let the loan originators at Supreme Lending Houston guide you to success.
Our team is committed to making the home-buying process as easy as possible for our clients. Because we’re considered a mortgage banker, we can offer a wider variety of mortgage lending services at competitive prices. Our goal is to create clients for life through true and lasting relationships, supported by the latest industry insights and technology. Call us or contact us online today for a consultation.