FHA loans are a great option for home-buyers because lenders who offer these types of loans require less stringent qualifications than typical mortgage lenders. However there are still guidelines that you must meet in order to be approved for an FHA loan.
For example, you will need to meet financial requirements, such as minimum credit score requirements as well as citizenship / residency requirements like proof of a Social Security number. These are the conditions you must meet in order qualify for an FHA loan:
- You must reside in the home that you are using the loan for. You cannot use FHA loan money for investment properties. This is why FHA loans are especially popular for first time home buyers.
- You must have a credit score of at least 500, although some lenders may require higher scores. Remember, the minimum down payment that you pay for FHA loans is indicated by your credit score:
580+ Credit Score: Your minimum down payment will be 3.5% of the home’s purchase price
500-570 credit score: Your minimum down payment will be 10% of the home’s purchase price
- Your debt-to-income ratio (known as DTI) must be below 43%. This means that less than 43% of your income should be going towards your mortgage payments and other debts.
For example: If you make $2,000 in income every month then you must spend $860 or less on monthly bills, including your projected mortgage payment.
- You must have at least 2 established credit accounts. This means that you must be able to show your credit history. Two ways that you could establish credit are by opening a credit card or taking out a car loan.
- You must show proof of a Social Security number.
- You must provide proof of income. This might include pay-stubs, W-2s, and tax returns
Now that you know how to qualify for an FHA loan you are on your way to purchase the home that you have always wanted.