The Requirements for an FHA Loan

The Federal Housing Administration, or FHA, is not a lender as many people mistakenly view them as. Instead, they are a federal organization that insures loans made by private lenders to home buyers. Because of the insurance they offer, lenders make loans to buyers that they otherwise probably wouldn’t. This helps many deserving Americans purchase their first home and take another step toward living the American dream.

What does it take to quality for an FHA loan? The basic requirements are listed below.

1) Borrower can’t have filed for bankruptcy for the past two years. If you have had a bankruptcy, your credit should ratings should be very good to stellar since the time of filing.

2) A minimum of 3% of the total sale price of the home must be made by the borrower.

3) You have to be an American citizen, in good standing with the IRS and State tax department, and have no criminal record.

4) If you have had a home foreclosure, it has to have been at least three years prior to applying for an FHA loan. If you have had one more recently, you will absolutely be turned down.

5) You have to prove adequate income to pay the monthly mortgage payment, and show it consistently for the past three years.

6) Your debt to income ratio must be favorable. This is an even more important factor than credit score.

While you may be able to qualify for an FHA loan, it is probably not your only mortgage option for a new home purchase.