An FHA loan is a government-backed mortgage insured by the Federal Housing Administration. The loan is popular with first-time homebuyers because they typically require lower minimum credit scores and down payments than many conventional loans.

You can qualify for an FHA loan with a credit score as low as 500 with 10 percent down. To get FHA’s maximum financing, you need a credit score of 580 or higher and 3.5 percent down. FHA borrowers also pay for mortgage insurance, which protects us, the lenders, from a loss if a borrower defaults on the loan.

FHA loan requirements in 2019

To be eligible for an FHA loan, borrowers must meet the following lending guidelines:

  • Down payment of at least 3.5% of the purchase price.
  • FICO score of 500-579 with 10% down or a FICO score of 580 or higher with 3.5% down.
  • Steady employment history or 2 years work experience with the same employer.
  • Income is verifiable through pay stubs, federal tax returns, and bank statements.
  • Loan is used for a primary residence.
  • Property is appraised by an FHA-approved appraiser and meets HUD property guidelines.
  • Your front-end debt ratio (monthly debt payments, excluding a mortgage) should not exceed 31% of your gross monthly income. Lenders may allow a ratio up to 40% in some cases.
  • Your back-end debt ratio (mortgage, plus all monthly debt payments) should not exceed 43% of your gross monthly income. Lenders may allow a ratio up to 50% in some cases.
  • If you experienced a bankruptcy, you must wait 2 years to apply. If you experienced a foreclosure, you must wait 3 years to apply. In the interim, you must also have re-established a positive credit history.

Contact us when you’re ready to start the mortgage process!