The Federal Housing Administration (FHA) has a loan to help both low- and moderate-income families with purchasing housing. All FHA loans are federally backed, and FHA lenders have been approved by the federal government to service the loans.
Make sure that you meet basic FHA loan requirements. You must be able to meet most, if not all, of these standards to qualify.
- You must prove that you have had 2 years of steady employment where your income has remained the same or increased. Your credit score should be 620 or higher with fewer than 2 30-day late payments in the past 2 years.
- You cannot have declared bankruptcy in the past 2 years or had a foreclosure in the past 3 years. If you have, it is crucial that you have re-established* your credit since. That term is very broad, so please contact me for further information regarding ‘re-established’ credit and what FHA’s definition of ‘re-established credit’.
Determine whether you can afford monthly FHA mortgage payments. Expect your mortgage payment to be up to approximately 46 percent of your gross income.
Save enough money to afford a down payment on a house. While it varies by location, FHA loans generally allow borrowers to obtain no more than 96.5 percent financing — which means you can expect to pay 3.5 percent of a home’s cost up front, as well as any and all closing costs. You cannot finance closing costs in an FHA purchase loan.
Steps to Take
Meet with an FHA-approved lender in your area. You can find a lender near you by searching on the United States Department of Housing and Urban Development website or by doing a Google search to find a highly reputable lender with good, strong reviews.
Provide the FHA-approved lender with documents that prove your employment status, savings, credit and personal information, they should send you a list of items required for approval. If they don’t ask for your tax returns, that is a HUGE red flag!
Complete an FHA loan application. Depending on the documentation you provided the lender, the lender may be able to pre-approve you for an FHA loan.
Because you are looking into FHA financing, you must have mortgage insurance to protect the lender. The insurance covers the risk of you not paying back your loan. All FHA loans, no matter how much you put down, have mortgage insurance.