FHA Mortgage Qualification Requirements in a Nutshell
12/17/2010 The Federal Housing Authority, or FHA, does not originate mortgages or lend money. The FHA is like an insurance company. It insures loans made by traditional lenders to borrowers who might not otherwise qualify for conventional loans.
If this is the case, then the qualification process for an FHA home loan must be different than the qualification process for a conventional loan--and it is. We'll cover the basic FHA qualification requirements here.
• The most significant requirement is that the borrower's housing ration, or monthly housing costs, cannot exceed 29% of his or her monthly income, before taxes. Most conventional loans allow your housing ration to equal up to 31% or even 33% or more of your monthly income.
• You must live in the home as your primary residence. FHA mortgages are almost exclusively home purchase mortgages for this reason, rather than second mortgages or bridge loans or other loan types.
• You need to have a credit score of at least 620. If you have no credit score at all, you can still qualify, but it will be harder.
• You'll need to report only two years of steady employment and income.
• First time home buyers are encouraged to apply for FHA loans. The FHA program is well suited to meet the financial needs of this demographic.
• Your loan must fall beneath the regional FHA loan limit. Because FHA loan are geared toward lower income borrowers, they are designed to allow buyers to purchase reasonably inexpensive houses. You probably won't be able to take out an FHA loan to buy a mansion.
• Any bankruptcy on your credit report must be at least two years old. You'll probably need to wait longer than that, though, if you want to qualify for one of the lowest mortgage rates you can.
These are the most basic requirements to qualify you for an FHA mortgage. Check with your personal lender to find out more specific requirements.
