FHA Loan Requirements
An FHA loan is a popular choice for borrowers due to its lenient eligibility criteria. This typically makes it easier for homebuyers to get approved.
In most cases, FHA loans are easier to get approved for than conventional loans. However, there are still specific requirements homebuyers need to meet. Lenders need to know that you can pay back the loan and that the property you wish to purchase is suitable.
To qualify for an FHA home loan, you'll need sufficient credit and income to show lenders you have the ability and willingness to repay the debt. FHA loan borrowers must also:
Millions of homebuyers have met these basic FHA requirements on their way to getting approved for an FHA home loan. Let's dive into the details a bit more.
To take advantage of the FHA loan’s 3.5 percent down payment, you’ll need a credit score of at least 580. Borrowers with credit scores below 580 may be able to qualify with a 10 percent down payment. But it’s also important to understand that FHA lenders can have credit score minimums that exceed what the government requires.
If you’ve filed for bankruptcy, you’ll need to be at least two years removed from the filing and have since established good credit. If you’ve experienced a foreclosure, you must be three years removed for the foreclosure.
Guidelines and policies on credit can vary by lender.
Lenders will look at the relationship between your gross monthly income and your major monthly debts when evaluating your loan file. Guidelines and restrictions on debt-to-income (DTI) ratio can vary by lender and other factors.
Some lenders may have lower thresholds than others, and borrowers with more challenging loan files can encounter more restrictive DTI guidelines.
Unlike USDA loans, FHA loans do not have restrictions on how much income borrowers can make.
A prominent selling point of an FHA loan is that it only requires a 3.5% down payment, especially for those who can’t easily save the traditional 20% down. However, your lender may require a higher down payment depending on your credit score. Either way, it's important to talk with your lender to see what you can afford.
Read more about FHA down payment requirements and acceptable sources for your down payment.
In order to protect homeowners as well as their financial investment, the FHA also sets requirements for what types of properties can be financed with FHA funding. To determine if your home meets these minimum requirements, your lender will order an appraisal of the property.
The appraiser will evaluate the condition of:
They’ll specifically be looking for signs of damage, deferred maintenance or deterioration. Normal wear and tear will be noted, but as long as a property appears well-maintained, it should qualify for FHA financing.
The main goals of the FHA appraisal:
In the event the home doesn’t pass appraisal or repairs are required, the seller will need to make the repairs. If the home doesn’t appraise for at least the purchase price, buyers can talk with the seller about renegotiating in light of the low valuation.
