December 7th, 2018


One of the biggest obstacles standing in the way of home ownership for most people is simple - having the money needed to buy their dream home. Not everyone can qualify for a traditional mortgage, and in these instances looking into other options is well worth doing. One of the best loans out there is the FHA loan, and for decades it has been helping millions get a loan and become homeowners.

But what does it really take to qualify? Taking a closer look at the basic requirements and how you can qualify and get your loan is well worth doing. You may be surprised by how easy it is to qualify for these loans.

What Is An FHA Loan?

Before you look at the requirements it's worth understanding just what an FHA loan actually is. Essentially, these are government-backed home loans. They're issued by a lender but are insured by the Federal Housing Administration. Borrowers also must pay a mortgage insurance premium on a monthly basis.

The loans are more accessible since the government backing takes much of the risk off the shoulders of lenders, who are then more likely to issue a loan to those that they normally wouldn't. The tradeoff is that those taking out these kinds of loans will often have to pay slightly higher interest rates. However, this is a trade-off that is worth it to most, and the benefits far outweigh a slight increase in interest rates.

Qualifying For The FHA Loan

There are several main factors that you'll need to pay attention to when considering an FHA loan. The basic 2018 requirements include the following.

Credit Score - While the bare minimum credit score for an FHA loan is 500, those who have a score of 580 will enjoy benefits such as lower interest rates and lower down payment requirements. Still, it's possible to get an FHA loan as long as your score is 500 or higher.

Down Payments - Those who have a credit score of 580 or higher will only need a down payment of 3.5% of the total cost of the home. Those with a score of 500 to 579, however, will need at least 10% down. Still, this is much less than the 20% down that most standard loans require. Additionally, the down payment can be a gift from a family member.

Debt To Income - Debt to income ratios are generally more important than credit scores with these loans. The specifics will vary, but your debt to income ratio can be much higher than with a traditional loan - sometimes up to 50% when including the loan that you're taking out.

Employment - This is one of the keys to getting an FHA loan as well. You must be able to provide proof of employment, usually at least 2 years at the same employer.

There are other factors that go into an FHA loan approval as well, including things like the condition of the home and the fact that you must live in the home within 60 days of closing. But, the points above are the main ones to focus on meeting and showcase why the FHA loan is so popular today.

Getting Your Loan

It's true that these loans are backed by the federal government. However, they aren't actually issued by them. You still need to use a lender that you can trust who lends through the FHA program. If you're looking for your dream home and need help getting a loan, our team is here to help.