FHA Loan Requirements

Important FHA Guidelines for Borrowers

The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders. FHA insures these loans on single family and multi-family homes in the United States and its territories. It is the largest insurer of residential mortgages in the world, insuring tens of millions of properties since 1934 when it was created.

FICO score at least 580 = 3.5% down payment.
FICO score between 500 and 579 = 10% down payment.
MIP (Mortgage Insurance Premium ) is required.
The home must be the borrower's primary residence.
Borrower must have steady income and proof of employment.

An FHA Loan is a mortgage that's insured by the Federal Housing Administration. They allow borrowers to finance homes with down payments as low as 3.5% and are especially popular with first-time homebuyers.

FHA loans are a good option for first-time homebuyers who may not have saved enough for a large down payment. Even borrowers who have suffered from bankruptcy or foreclosures may qualify for an FHA-backed mortgage.

FHA Loan applicants must have a minimum FICO score of 580 to qualify for the low down payment advantage which is currently at 3.5%. If your credit score is below 580, the down payment requirement is 10%. You can see why it's important that your credit history is in good standing.

Keep in mind that FHA credit requirements cover more than just your FICO score; they also determine eligibility based on a borrower�s payment history, bankruptcies, foreclosures, and extenuating circumstances that keep applicants from making timely payments.

The FICO� score is a number that represents a potential borrower's creditworthiness. FICO� is a data analytics company which uses consumer credit files collected from different credit bureaus to compute their scores.

Your FICO� score is reviewed by lenders and is used to determine how likely you are to make timely payments on your mortgage. The higher the score, the better your chances are of getting a lower interest rate on your mortgage.

Your FHA lender will review your past credit performance while underwriting your loan. A good track record of timely payments will likely make you eligible for an FHA loan. The following list includes items that can negatively affect your loan eligibility:

No Credit History
If you don't have an established credit history or don't use traditional credit, your lender must obtain a non-traditional merged credit report or develop a credit history from other means.

Bankruptcy
Bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage. For Chapter 7 bankruptcy, at least two years must have elapsed and the borrower has either re-established good credit or chosen not to incur new credit obligations.

Late Payments
It's best to turn in your FHA loan application when you have a solid 12 months of on-time payments for all financial obligations.

Foreclosure
Past foreclosures are not necessarily a roadblock to a new FHA home loan, but it depends on the circumstances.

Collections, Judgements, and Federal Debt
In general, FHA loan rules require the lender to determine that judgments are resolved or paid off prior to or at closing.

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