FHA Loan Guidelines: Everything You Need to Know
FHA loans accounted for 12.1 percent of all mortgages in 2018, showing how this program is helping American’s achieve their dream of homeownership. Making sure you meet FHA loan guidelines can help you get approved so that you too can own your own home.
You Must Meet FHA Loan Guidelines
While FHA loans permit lower down payments and are more lenient when it comes to credit score requirements, there are guidelines and requirements that must be met by the borrower. Guidelines cover essential components related to your creditworthiness including income, credit score, debt-ratio, mortgage insurance, and type of home purchase.
Benefits of FHA Loans
FHA loans can help individuals own their own home, even if they have difficulty securing a conventional mortgage. Some of the key benefits of FHA loans include:
- Low down payments
- Lower credit requirements
- More affordable closing costs
- Insurance that can be financed as part of the loan
- Available as fixed-rate or adjustable-rate
- Available with 15-year and 30-year terms
FHA Loan Guidelines
FHA loans can be used to purchase both single-family and multi-family homes. Rather than direct distribution from the government, these loans are granted via FHA-approved lenders. FHA guidelines include:
- FICO Score Requirements:
- 500-579: 10% down payment
- 580+: 3.5% down payment
- Private Mortgage Insurance required
- Debt-to-Income ratio less than 43%
- Home must be borrower’s primary residence
- Borrower must have steady income with proof of employment
Guidelines are Getting More Strict
Tougher guidelines have been instituted by the Federal Housing Administration in 2019 to minimize risky loans. They are not outrightly denying loans, but the strict guidelines now require rigorous, manual review.
When Conventional Loans Don’t Fit the Bill
FHA loans can be a viable option can’t make a large down payment, have low credit, and cannot afford the closing costs associated with conventional mortgages. FHA loans can help your home, but they aren’t necessarily the right financing option for everyone. Talking with a loan officer can help you decide whether an FHA loan is for you.
Apply for an FHA Loan Today!
FHA loans are only available to those borrowers who meet the strict guidelines. A Mortgage Solutions Financial loan officer can help you determine whether you qualify for an FHA loan and can discuss your available financing options. Contact us today to get on your way to owning your own home.