6 FHA Mortgage Requirements for Home Buyers

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Clever Real Estate

Updated 

March 19th, 2019

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You may believe having debt, a low credit score, or poor credit history will keep you from ever purchasing a home. But don’t give up just yet on homeownership. With FHA loans, you can more easily qualify for a home mortgage. Discover the 11 key requirements you need to qualify.

Buying a home can be an overwhelming process, especially when it comes to the price tag. And unfortunately, it’s that price tag that causes many potential buyers to think their dream home is just that — a dream.

This is where FHA home loans play an integral role in making that dream home a reality.

What is an FHA Mortgage?

FHA loans are one of the most obtainable home mortgage loans available. The FHA, short for Federal Housing Administration, insures loans from private mortgage lenders in order to make loans affordable to potential homebuyers who have poor credit or who can only offer a low down payment.

Who Should Apply for an FHA Mortgage?

FHA loans are an attractive option — particularly for first-time homebuyers who may struggle to afford a large down payment or have low, or even in some cases, a non-existent credit score.

However, you don’t have to be a first-time homebuyer to qualify for an FHA loan.

FHA loans are also great for homebuyers with:

  • Low income
  • Low credit scores
  • Poor credit history
  • High debt-to-income ratio

So, how do you qualify for a FHA loan? Here are 11 key requirements:

11 Key Requirements for a 2019 FHA Loan

1. Have a 580+ credit score with 3.5% down payment

Undoubtedly the low credit score and down payment requirements are the biggest draws of FHA loans. With a 580+ FICO score, you only have to put up 3.5% of your down payment which is notably lower than most conventional loans.

2. Credit scores between 500-579 require 10% down payment

Not to worry, if you’re within the 500-579 range, you can apply for an FHA loan. Just be aware you’ll need a 10% down payment and your interest rates and monthly payments will be higher. To give yourself the best chance, increase your credit score as much as possible.

3. Have a max of 43% debt-to-income ratio

Whether you’re still trying to pay off student loans, car loans, or credit cards, debt can really limit your options. However, with the FHA loan, you can qualify to have up to a 43% debt-to-income ratio and in some cases 50%.

4. Get appraised by an FHA-approved appraiser

Once you find a property you like, a FHA-approved appraiser will assess the home making sure it meets FHA requirements. They will look for any issues that don’t meet FHA health and safety standards as well as determine the current market value of the home.

5. You must have mortgage insurance (MIP)

MIP, short for a mortgage insurance premium, is required for every FHA loan. MIPs are an insurance policy in place if you need to default on your loan thereby allowing lenders to lower their loan requirements. You’ll be required to pay two MIPs: upfront and annual.

6. Have a history of employment

You’ll need two years of employment history. But don’t sweat it if you haven’t been with the same employer or there are gaps in your employment. It won’t necessarily affect your eligibility as long as they see you’ve been working.

7. Show steady employment

To be a good candidate, lenders want consistent employment to make sure you’re reliable and low risk. You’ll be required to prove income through tax returns, W2s, and paycheck stubs.

8. You can have a co-borrower

If you’re having trouble qualifying for an FHA loan, adding a non-occupying co-borrower to your loan (usually a family member) who has income and good credit could help get you approved.

9. Must be 18 years old

Pretty straight forward. You need to be 18.

10. The home must be your primary residence

You can’t take out an FHA loan on your vacation house. To qualify, the home must be your main residence.

11. Student loans play a big role

Student loans are factored into your debt-to-income ratio (DTI) meaning if you have high student loan payments, it could push your DTI over the accepted limit affecting your eligibility. You may have to pay down other loans first before you’re approved.

Next Steps

For more information on FHA loans and the most up-to-date requirements, check out some of the following resources:

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