2018 FHA Loan Requirements
This page encompasses the entire scope of the requirements to get a FHA loan in 2018. It covers the guidelines pertaining to credit, debt-to-income, mortgage insurance, and finally the property itself. You may read more about each topic by following the link below each paragraph.
FHA Loan Credit Requirements
The FHA requirements for credit refer to a few areas of your credit report which are evaluated to determine the likelihood of having the ability and willingness to repay your FHA loan. They are related to credit scores, credit depth (trade-lines), derogatory marks, and recent bankruptcies or foreclosures.
- Credit Score – The minimum FICO score that our FHA loans require is 620 (fair credit or higher). Other FHA mortgage lenders may be able to approve you for a lower score if you are below a 620. That is our minimum credit score requirement for FHA loans.
- Trade-lines – The FHA does not have any specific number of trade-lines that it requires. As long as you have a little bit of credit history established and demonstrated the ability and willingness to repay past or current debts, your credit should be fine (assuming you have a 620 or higher score, and no major credit issues).
- No Bankruptcies – In order to qualify for a FHA loan, in most cases, you must have not had a bankruptcy in 2 years.
- No Foreclosures – In order to qualify for a FHA loan, in most cases, you must have not had a foreclosure in 2 years.
There is a reasonable degree of leniency with FHA loans, much more than conventional mortgages. If you have a 620 or higher credit score, with no recent foreclosures or bankruptcies, you should pass the credit evaluation part of your FHA application.
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FHA Loan Down Payment Requirements
The down payment requirements for FHA loans are very straight forward. FHA rules allow a minimum down payment of 3.5% regardless of the borrower. If you are approved for a FHA loan, you will automatically have this option. This money can be borrowed, or paid by another source. It does not require having the money seasoned within your own bank account.
- Example #1:
Home Purchase Price: $100,000
Down Payment Requirement: 3.5%
Total Down Payment Needed: $3,500
- Example #2:
Home Purchase Price: $150,000
Down Payment Requirement: 3.5%
Total Down Payment Needed: $5,250
- Example #3:
Home Purchase Price: $250,000
Down Payment Requirement: 3.5%
Total Down Payment Needed: $8,750
If you are eligible for down payment assistance, you may be received up 3% which can be applied towards the FHA down payment. If 3% in assistance were received, it would mean you must pay just 0.5% down. We can help you determine your down payment assistance eligibility.
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FHA Loan Debt-to-Income Requirements
The guidelines for how much debt you may have in relation to your income have two important numbers. The first is what percent your mortgage payment will be compared to your monthly income. This is the “front end ratio”. The other is how much your total debts with monthly payment obligations are compared to your monthly income. This is known as the “back end ratio”.
- Front Ratio – The maximum percentage of your income that your mortgage payment can be is 29%. This means if you make $4,000/month, the highest mortgage payment you are eligible for is $1,160 (which is 29% of $4,000).
- Back Ratio – The maximum percentage of your that your total debts can be is 43%. If you make $4,000 a month, the highest amount of monthly debt payments you may have is $1,720 (which is 43% of $4,000). This includes your mortgage payment, as well as auto loan payments, credit card payments, and other debts present on your credit report which require a monthly payment.
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FHA Loan Property Requirements
FHA loans are available nationwide for 1-4 unit properties, as well as approved townhouses and condominiums. The primary requirements related to the home you want to purchase have to do with specific property conditions. The FHA adheres to HUD guidelines related to “minimum property standards“. These are FHA/HUD rules that require a property to be “safe, security, and sound”.
One of the main reasons that the FHA requires a property to be in good condition is to ensure it has solid resale value. If a homeowner in an FHA-insured mortgage were to default and foreclose on the property, it would be listed for sale. The FHA wants to ensure that a property does not have any major structural issues. The home inspection also will ensure that the home is free of hazards for your safety and the safety of others.
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FHA Loan Mortgage Insurance Requirements
The FHA requires that all loans carry two types of mortgage insurance premiums (MIP). This includes both UPMIP and ongoing MIP. All FHA loans (regardless of lender) require the exact same percentages for both types of mortgage insurance.
- FHA UPMIP – The Upfront Mortgage Insurance Premium – or UPMIP – is 2.75% of the loan amount. This is included into the loan amount and financed into the monthly payments.
- FHA MIP – The regular Mortgage Insurance Premiums – or MIP – is paid monthly. It is 0.80% of the loan amount and readjusts annually. It is easiest to calculate both premiums using our calculator, which also has a very useful “how to use this calculator” button which will help clarify how to calculate what you will likely pay in mortgage insurance based on expected loan amount.
To see how much mortgage insurance may cost you based upon your expected loan amount and interest rate, use our FHA Mortgage Insurance Payment Calculator.
We make it easy to receive a free rate quote and get pre-approved for a FHA loan. Your loan specialist will help answer all of your questions, assist you with an easy application, and help you compare your options. To schedule a free consultation, please send us a quick request to receive more information. All you need to do is request a free consultation, and a FHA mortgage specialist will be in contact with you within 24 hours.