Did you know that in the first quarter of 2022 alone, over $800 billion in mortgages were lent out?
Acquiring a home loan is a major component in purchasing the house you desire. If you’re struggling to get a conventional mortgage, an FHA loan may be the answer to all your prayers. But what are the requirements to qualify for an FHA mortgage?
Wonder no more!Read on the learn everything you need to know before you apply for an FHA mortgage. We’ve got you covered.
The Basics of an FHA Loan
FHA loans are government-backed mortgages offered by the Federal Housing Administration (FHA). FHA mortgages are provided by private lenders and not by the government. They are insured by the FHA, which guarantees they are less risky for both the borrower and the lender.
FHA loans require a smaller down payment compared to non-FHA loans. They also require a much lower credit score. A borrower only needs to have a 500 credit score to apply, although lenders may ask for a higher score, depending on their underwriting requirements.
Requirements to Apply for FHA Mortgage
Several requirements must be met in order to apply for an FHA mortgage loan. There are also different requirements depending on the type of FHA loan you are seeking to get. Let’s look at the general requirements that apply to all FHA loans.
Credit Minimum
To qualify for a loan, a borrower must have a credit score of at least 500. Although this score is enough to qualify for an FHA loan, many lenders require a much higher credit score. They require a higher credit score to weed out poor borrowers and protect their investments.
Therefore, it’s important to consider many different lenders while completing the application process.
Loan Limits
As of 2022, the loan limit of an FHA loan is $420,000 for homes in low-income areas and $920,000 for homes in high-income areas. These limits will also vary by county, so it’s important to understand what your local FHA loan limits are.
Down Payment Minimum
The down payment minimum on a mortgage backed by an FHA loan depends on the borrower’s credit score. Borrowers with a credit score between 500 and 579 must make a 10% down payment. For borrowers with a credit score of 580 and higher, only a 3.5% down payment is necessary.
Income Requirements
There are no salary requirements to qualify for an FHA loan. However, a borrower must meet a few other financial requirements.
A borrower must have:
- No outstanding federal debt
- At least two credit accounts (car note, credit card, etc.)
- An account for all cash contributions that go towards the loan down payment
Debt-To-Income Ratio
A person’s debt-to-income ratio measures how much of their pretax income gets spent on outstanding debt payments. Debt payments include monthly credit card payments, student loans, and rent payments.
Generally speaking, borrowers who qualify have a DTI of below 43%. A borrower’s highest DTI is 50%, but they must have a credit score of 580 or above.
The Bottom Line
Some types of FHA loans have specific requirements, but the requirements described above apply to all FHA loans. Hopefully, any confusion you had about how to qualify and apply for an FHA mortgage is gone.
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7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with each mortgage transaction phase. If you are searching for a home loan in New Jersey, Pennsylvania, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.