November 30th, 2018

Finance

Buying a home is one of the biggest steps anyone can take in their life, but when they struggle to find a good mortgage loan that fits their needs and their situation it can make it much harder to do. FHA loans are a great option for many people and are designed to be easier to qualify for and to provide you with a chance to buy that dream home. But what does it take to qualify for them?

FHA Loan Basics

An FHA loan is a type of mortgage loan that is guaranteed by the Federal Housing Administration. Thanks to the government backing, lenders are far more likely to offer loans to those that may not otherwise have qualified for them.

These loans have always been focused on first time home buyers and those who have less than perfect credit, and as such, they could come with a slightly higher interest rate. But, the ability to buy a home despite not qualifying for traditional loans makes them well worth thinking about.

FHA Loan Requirements For 2018

Every year, a few changes are made to the guidelines for FHA loans. 2018 is no different, and this year's loan requirements are found in a 1,009-page book. It's a lengthy, boring read that you don't have to make since the primary loan requirements can be broken down easily. Below, you'll find the main requirements to be aware of.

Credit Score - Your credit score only needs to be 500 in order to buy your home through an FHA loan. Higher scores can make things easier and net lower down payment requirements and interest rates, but this low credit requirement is a key benefit of the FHA loan.

 Down Payment - The higher your credit score, the lower the down payment. While a score of 500 is technically all that is needed, those with a score lower than 579 will have to put 10% down on the home. Those with a score of at least 580 will only need 3.5% down to buy their home.

Debt To Income - Debt to income ratios must be 50% or less in order to qualify for the FHA loan. This includes the actual FHA loan that you're applying for, along with any existing monthly obligations you may have.

Two Accounts - You'll need two established credit accounts. These can include credit card accounts, auto loans, and so on.

Property - The property can't be an investment property, and you must occupy the home within 60 days of the closing date. Additionally, the home must meet inspection guidelines.

Loan Limits - Each area of the country has different limitations on the loan, but in general you can expect your loan to be limited to $294,515 for single family homes in low-cost locations and $679,650 in high-cost areas.

You'll have to be able to provide documentation such as your Social Security Number and pay stubs, and some other requirements may exist. But these are the basic points to focus on fulfilling when you're trying to secure your FHA loan in 2018.

Is The FHA Loan Best For You?

The FHA loan is a great option for anyone who has credit that isn't quite what a traditional lender would feel comfortable with. The slightly higher interest rate is a fair trade-off for the chance to own your own home, and anyone who is in the process of making their dream come true should think about looking at these loans. We can help you find the loan that is perfect for you and answer all of your questions about it.