Some conventional mortgages demand sizable down payments and closing costs. This can make it difficult for some people to pay upfront. Luckily, the Federal Housing Administration (FHA) provides a solution for homebuyers who have little cash on hand to cover these expenses by offering low down payments and minimal closing costs. These FHA loans can come in handy when you’re trying to purchase a home.
FHA loans, which are backed by the Federal Housing Administration, are issued through approved lenders, such as banks. These loans have more lenient borrowing criteria than conventional loans and lower down payments and closing costs. Now, it’s important to note that these loans have different requirements. If you’re thinking of applying for an FHA loan, it would be best to familiarize yourself with them. This is why we thought it would be useful to put together a brief discussion on this subject. If this is something that you want to learn about, read on as we break down how to qualify for an FHA loan.
What Are the Requirements for an FHA Loan?
While FHA loans do have more relaxed borrowing criteria, they also have certain requirements that are unique to FHA loans. Here are some requirements that you should keep in mind when preparing for your FHA loan application:
- Unlike more conventional loans, FHA loans can only be used to purchase a new or existing family home. Family home, in this case, refers to homes with one to four units, certain condominium units and manufactured housing units on a permanent foundation.
- The property must be your primary or principal residence of the borrower. This means you can’t use an FHA loan to finance a second home or vacation home.
- The property must meet FHA’s strict appraisal standards. This is so that they can ensure that the home is worth the amount of the loan, is livable and is expected to last at least as long as the term of the loan.
- The size of the loan must fall within the FHA mortgage limits. FHA loans are available up to a certain amount. It’s important to note that the exact amount varies by location since housing is more expensive in some areas of the country, based on the FHA limits. You can find out more about the FHA mortgage limit in your area on the HUD website.
- You must pay a mortgage insurance premium.
- If you have a FICO score of 580 or higher, you might be eligible for an FHA loan with only 3.5% down. Those of you with a lower credit score could still qualify for an FHA loan. If your FICO score is as low as 500, though it requires a larger down payment of 10%.
As you can see, figuring out the requirements and qualifying for an FHA loan isn’t that complicated. We hope this article has helped further your understanding of FHA loans. Be sure to keep all the information that we’ve laid out here in mind the next time you are thinking of applying for an FHA loan.
While this article has covered the basics of FHA loans, it never hurts to seek out more information. To better prepare yourself to become a homeowner, let a Cross Timbers Mortgage loan advisor help you through the home buying process and find the best home mortgage in Oklahoma and Florida for your needs. Contact us today to take the first step towards homeownership!