For years, the FHA loan program has been the program that attracted potential homeowners who had a less-than-perfect credit score or couldn’t make a sizeable down payment. They have succeeded in making home ownership a real possibility for many people, but there are still a lot of requirements that must be met in order to qualify.



An FHA loan will require an upfront mortgage insurance premium (MIP), which can add a little bit extra to your payments. The insurance premium will usually be 1%, but it can be up to 3% in some cases. (First-time homebuyers, though, will be capped at 2.75). There will also be a small ongoing fee with the monthly payments. All of this is necessary because this is the money the FHA will use to repay the loan if the lender defaults on it.


Down payment

The FHA does not require much for a down payment. While a conventional loan can require up to a 20% down payment, the FHA loans can be as low as 3.5%. This entire payment can be gifted by someone else, as long as they have no financial interest in the loan process.



In order to prequalify for an FHA loan, you will be required to demonstrate your employability and reliability. You will need to show job stability over the past two years, and that you received increasing (or at least consistent) income during that time period. Your monthly housing costs for your loan should not be more than 31% of your gross monthly income, and there should be no foreclosures or bankruptcies in the last three years.

It is important to note that while the FHA has not stated minimum credit score, they are not the ones actually providing the loan. Individual lenders may have their own guidelines on these issues.

We can help you understand the different requirements of this program so you can be fully prepared when you apply for your loan. Contact us today to learn more.

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