An FHA mortgage is a home loan insured by the Federal Housing Administration. The FHA is part of the Department of Housing and Urban Development (HUD).<\/p>\n
FHA mortgages allow buyers to purchase a primary residence with low down payments and more lenient credit than conventional loans. Borrowers pay mortgage insurance in exchange for the easier underwriting standards.<\/p>\n
The most common type of FHA mortgage is the 203(b) for buying or refinancing a primary home. You can use FHA financing to buy a single-family house, condo, townhouse or manufactured home.<\/p>\n
Do you meet the eligibility requirements for an FHA mortgage? Here are the key criteria:<\/p>\n
Down payment<\/strong> – Just 3.5% of the purchase price is required. The money can be gifted. Seller contributions aren’t allowed.<\/p>\n Credit score<\/strong> – A minimum of 580 FICO is required for 3.5% down. Scores as low as 500 can qualify with 10% down.<\/p>\n Debt ratios<\/strong> – Your total debt-to-income ratio must be under 43%.<\/p>\n Occupancy status<\/strong> – You must intend to use the home as your primary residence.<\/p>\n Property type<\/strong> – Single-family homes, condos, townhouses and manufactured homes are eligible.<\/p>\n First-time homebuyer<\/strong> – There are no first-time homebuyer requirements for FHA loans. Both first-timers and repeat buyers can qualify.<\/p>\n Meeting these FHA mortgage requirements is the first step toward getting approved. Now let\u2019s look at the paperwork and documentation you\u2019ll need.<\/p>\n When applying for an FHA mortgage, you should have these documents handy:<\/p>\n Providing these documents allows the lender to verify your identity, income, employment, assets and overall financial health. Having your paperwork in order makes for a smoother mortgage application process.<\/p>\n Ready to move forward with an FHA mortgage application? Follow these steps:<\/p>\n 1. Check your credit<\/strong> – Order a credit report and review your scores. Dispute any errors.<\/p>\n 2. Get pre-approved<\/strong> – Apply with lenders and compare pre-approvals. Shop interest rates.<\/p>\n 3. Find a home<\/strong> – Once pre-approved, start touring suitable houses within your budget and search area.<\/p>\n 4. Make an offer<\/strong> – Submit a purchase offer with your real estate agent’s assistance.<\/p>\n 5. Complete loan application<\/strong> – Provide documents to your chosen lender to complete the full application.<\/p>\n 6. Home inspection<\/strong> – An FHA appraisal and inspection will check for any required repairs.<\/p>\n 7. Final approval<\/strong> – Your lender issues a clear to close once all conditions are met.<\/p>\n 8. Closing<\/strong> – Review final documents, sign, and get the keys!<\/p>\n Now you have a better idea of what to expect as you move through the FHA mortgage process from start to finish.<\/p>\n FHA mortgages have some costs that conventional loans don\u2019t. Here are the main expenses:<\/p>\n Mortgage insurance<\/strong> – An upfront 1.75% insurance premium and an annual 0.45% to 1.05% premium.<\/p>\n Loan fees<\/strong> – A 1.75% upfront fee and 0.45% to 0.55% annual fee.<\/p>\n Interest rate<\/strong> – Rates are competitive but may be 0.25 to 0.5 points higher than conventional loans.<\/p>\n Closing costs<\/strong> – Around 2% to 5% of the loan amount including appraisal, origination fees and more.<\/p>\n Repairs<\/strong> – If repairs are required based on the inspection, you\u2019ll need to cover these.<\/p>\n Shop lenders to compare rates and ensure you\u2019re getting the best pricing on an FHA mortgage for your situation.<\/p>\n Follow these tips to score the lowest possible interest rate on an FHA mortgage:<\/p>\n Even a small reduction in your FHA mortgage rate can lead to substantial interest savings over the life of your loan.<\/p>\n FHA mortgages make homeownership attainable for many buyers. But weigh the pros and cons before choosing this route:<\/p>\n An FHA mortgage makes sense if you want to buy with limited funds and have past credit issues. Just ensure it\u2019s your most cost-effective option.<\/p>\n Beyond an FHA loan, also consider these other mortgage programs:<\/p>\n Conventional 97<\/strong> – Just 3% down with flexible income and credit requirements.<\/p>\n VA loans<\/strong> – 100% financing for veterans and service members. No down payment or PMI.<\/p>\n USDA loans<\/strong> – 100% financing for low-income borrowers in rural areas.<\/p>\n Bank portfolio loans<\/strong> – Programs from community banks and credit unions to assist local buyers.<\/p>\n State\/local programs<\/strong> – Special first-time buyer and down payment assistance options in your state.<\/p>\n Compare all programs to find the optimal mortgage solution for purchasing your dream home.<\/p>\n Do you still have some questions about FHA mortgages and how they work? Here are answers to the most frequently asked questions:<\/p>\n Yes, with an initial down payment of 10% or higher, mortgage insurance cancels once you reach 22% equity in the home. With less than 10% down, it remains for the duration of the loan.<\/p>\n The minimum credit score is 580. But scores of 620 or higher get the best mortgage rates. You can qualify with scores in the 500s with a larger down payment.<\/p>\n No, FHA mortgages must be used to purchase a single-family home, condo, townhouse, or manufactured home. Multi-family properties don\u2019t qualify.<\/p>\n Use an online mortgage calculator to estimate principal, interest, taxes, insurance and total monthly costs of an FHA mortgage based on the loan amount, rate, term and your down payment.<\/p>\n No, FHA mortgages are only allowed for owner-occupied primary residences where you\u2019ll live at least 51% of the year. You cannot use an FHA loan for a vacation home or rental property.<\/p>\n There are no set income limits. But your income, assets, employment and credit profile must demonstrate you can repay the mortgage comfortably based on your debts.<\/p>\nDocuments Needed for an FHA Mortgage<\/h2>\n
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How to Apply for an FHA Mortgage<\/h2>\n
How Much Does an FHA Mortgage Cost?<\/h2>\n
How to Get the Best FHA Mortgage Rates<\/h2>\n
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Pros and Cons of an FHA Mortgage<\/h2>\n
Pros<\/h3>\n
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Cons<\/h3>\n
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Alternatives to an FHA Mortgage<\/h2>\n
FHA Mortgage FAQs<\/h2>\n
Can I remove FHA mortgage insurance?<\/h3>\n
What FICO score is needed for an FHA mortgage?<\/h3>\n
Can I buy a multi-family home?<\/h3>\n
How do I calculate FHA mortgage payments?<\/h3>\n
Can I use an FHA mortgage for a second home?<\/h3>\n
Are there income limits for FHA mortgages?<\/h3>\n
Finding the Right FHA Mortgage Lender<\/h2>\n