FHA Mortgage Eligibility
The requirement of FHA loan is more convenient than other conventional loans. To qualify for an FHA loan to purchase a home, the borrower needs a 580 credit score and a 3.5% down payment.
Other requirements include your monthly gross income and credit card and employment history that qualifies you for an FHA mortgage. With an FHA loan, you will need to make the initial accommodation, where you will live permanently. With this money, you cannot buy a second home or investor property.
The advantage of an FHA loan is that it does not limit your income. They also give you flexibility if you do not have a good credit card score. If you are a first time homeowner, then FHA mortgage is the best option for you.
FHA loan requirements
There are certain requirements that you must meet in order to qualify for an FHA loan. Some of these requirements are mentioned which make the borrower eligible.
Down payment: You need 3.5% down payment to qualify for FHA loan. If your home purchase price is $ 300,000, your down payment will be $ 10,500.
Credit card score: You must have a credit card score of 580 or higher to qualify for the loan. If your credit card minimum score is 500 and maximum score is 579 then you need 10% down payment.
DTI: The debt-to-income ratio should range from 43 percent to 45 percent. Eligibility for loan with 50% DTI is possible but conditional.
Primary residence: Your home must be your primary residence. It cannot be a second home or investor property.
Minimum property requirements: The property you purchase must be safe and secure. Your home will be evaluated by an FHA appraiser.
FHA Loan Limits: In most countries, the FHA loan limit for a single family is $420,680. In high cost area, this loan limit may increase.
This requirement is better than other conventional loans, so it is very convenient. If you have a low credit score, large debt, or are unable to qualify for a conventional loan, you may qualify for an FHA loan. But the downside of this loan is that you have to pay advance and annual mortgage insurance premium.
If the term of the loan is 30 years, then 1.75% upfront MIP has to be paid based on the loan amount. The amount of annual mortgage insurance premium will be 0.85% for the life of the loan. If your downpayment is 10 percent or more, the annual insurance term will be 11 years.
Eligibility for FHA loan
When you know the details of FHA loan requirements, you will know if this mortgage is suitable for you. Here’s a few basic facts about a FHA program and how it works.
FHA is not a mortgage lender
The FHA does not provide any type of mortgage loan. When you meet the requirements for an FHA loan, you will qualify for the loan. The FHA compensates the lender if you cannot repay the loan or default. This lender accepts low credit score due to this FHA insurance.
All types of home buyers qualify for the loan
Although it is the best option for first time home buyers, second home buyers will be able to refinance through FHA mortgages.
This FHA loan is open to home buyers who are buying a home for a second time. However, a purchased home can never be a second home or investor property. After all, to qualify for an FHA loan, you don’t have to be a first-time home buyer.
No income limit is required
Most downpayment mortgages require special eligibilities. No income limit is required, low or middle income borrowers can apply for the loan.
For example, in the case of a VA loan, you will be allowed 100% financing. But to qualify for it, you have to be a military borrower.
In the USDA Rural Development Loan, you will be allowed 100% financing, but with conditions. You can only purchase your property or home in a designated rural area.
Allows low credit scores
There is no need to have a good credit score as per the requirements of FHA. If your minimum credit card score is 500, you will qualify for FHA.
FHA loans are not expensive
FHA loans are less expensive than other conventional loans. The cost of the loan depends on your downpayment, loan amount and location.