FHA loan requirements aren’t that difficult to obtain if you are interested in getting a home mortgage. The government insures an FHA (Federal Housing Administration) loan. Because of that guarantee, even borrowers with low credit scores can apply for it and be approved. First-time homebuyers are attracted to FHA loans because the requirements aren’t as stringent as the other types of mortgage.
Did you know that you can pay as low as 3.5% of your downpayment when applying for an FHA loan? If you have a credit score of 580 and above, this is your only requirement for your downpayment. But what if you fall below the 580 credit score, you can still apply for an FHA loan, but you will have to prepare a 10% downpayment. The rule of thumb here is that the higher your credit score, the lower your required downpayment, and the lower your credit score, the higher your downpayment.
Banks, mortgage companies, and other financial institutions release the FHA loans. But did you wonder why FHA loan requirements are relatively easier to comply with? This ease of doing business is because the government guarantees it. This means FHA loans carry a lesser risk for banks than conventional loans when buyers default on their payments. Plus, qualified borrowers need to purchase mortgage insurance as well.
Aside from the credit scores mentioned earlier, lenders will also scrutinize your credit history. How well have you been repaying your debts and obligations for the past two years? Even if the government guarantees your FHA loan, you will still have to pay your mortgage. That being said, you must prove to FHA-approved lenders that you have a steady source of income and will be able to fulfill your financial obligations. Expect to be asked for your tax returns and other proof of income.
If you want to know more about the FHA loan requirements, let us know and we’ll help you go through the process.