FHA Loans 101
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FHA loan requirements include minimum credit scores and down payments. There are limits on loan amounts and your total monthly debt load.
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FHA loan requirements are published in a handbook more than 1,000 pages long. You would need to drink at least a 20-ounce cup of coffee with a turbo shot just to stay awake through the first 20 pages. Good news: You don’t have to do that, because NerdWallet summarizes the rules for you.
Here’s what you need to know about the requirements to get a Federal Housing Administration loan, without the jargon and footnotes — about topics such as debt-to-income ratios, loan limits and credit scores.
» MORE: Overview of FHA loan basics
FHA loan down payment
With the FHA, the minimum down payment depends on your credit score. With a credit score of 580 or higher, the minimum down payment is 3.5%. With a score of 500 to 579, the minimum down payment is 10%.
FHA debt-to-income requirements
Lenders pay attention to your debt-to-income ratio, regardless of the type of mortgage you get. The debt-to-income ratio, known as DTI, measures the percentage of your pretax income that you spend on monthly debt payments, including mortgage, credit cards, student loans and other obligations. You can use a debt-to-income ratio calculator to figure out where you stand.
The FHA requires a debt-to-income ratio of 50% or less, according to Brian Sullivan, public affairs specialist for the U.S. Department of Housing and Urban Development, which runs the FHA.
FHA loan income requirements
There is no minimum — or maximum — salary you can earn that will qualify you for or prohibit you from getting an FHA-insured mortgage. However, you must:
Have at least two established credit accounts. Examples: a credit card and a car loan.
Not have delinquent federal debt or judgments — tax-related or otherwise — or debt associated with past FHA-insured mortgages.
Account for cash gifts that help with the down payment. These gifts must be verified in writing, signed and dated by the donor.
Here is some of the documentation you will need when applying for an FHA home loan.
You must show proof of a Social Security number.
Provide original pay stubs, W-2 forms or valid tax returns, as necessary.
Of course, there are other stipulations — remember, the handbook is more than 1,000 pages — but an FHA-approved lender will walk you through the details if other requirements apply to you.
FHA property requirements
In addition to borrower qualifications, the property itself must meet certain requirements before you can qualify for an FHA mortgage.
The loan must be for a principal residence, and at least one borrower must occupy the property within 60 days of closing.
It can't be an investment property.
An FHA appraisal includes a strict inspection, assessing a home not only on value but also on minimum property standards.
The property can’t be a flip: meaning you can’t buy a house within 90 days of a prior sale.
You must take title to the property in your own name or in the name of a living trust at settlement.
FHA loan limits
The property must meet FHA loan limits, which vary by county. In 2019, that’s generally $314,827 for single-family homes in low-cost areas and $726,525 in high-cost areas.
There are lender requirements, too
The FHA insures the loan, but a lender makes the final decision whether to hand over the money — and can determine what specific qualifications it requires.
Sullivan, spokesman for HUD, says: “We can set our standards, and we can say, ‘If you meet these requirements, FHA will insure a mortgage on that loan.’ And yet, lenders may add on what are called ‘credit overlays’ on top of our standards, and make it that much harder to qualify for a loan that they originate.”
Those requirements can include a higher credit score, or a better debt-to-income ratio. It’s a good reason to shop more than one lender.
What if you don’t meet all FHA requirements?
“FHA’s standard underwriting criteria is rolled up into a ‘scorecard’ that considers many factors related to income and debt,” Sullivan says. “Under certain conditions, particularly when a borrower doesn’t fit into our general score card requirements, a manual underwriting is required.”
That means if your situation doesn’t neatly fit within all the guidelines, a lender may consider your loan application as a one-off instance, an exception.