The Federal Housing Administration (FHA) offers government-insured loans that provide homebuyers with flexible loan options. Even seasoned homeowners may need to plan for an extended period to finance a new home purchase. However, FHA loans can make it easier for some buyers to achieve their homeownership dreams by allowing a lower down payment.

The specific FHA loan requirements can vary based on factors such as the property type, income, credit score, and down payment, among other buyer attributes. It is essential to consult with a knowledgeable lender to determine whether an FHA loan is the right choice for your particular financial situation.

What is an FHA loan?

FHA mortgages are loans backed by the U.S. Federal Housing Administration. Lenders, such as banks, mortgage companies and credit unions, that provide FHA loans provide funding for home purchases while requiring a lower down payment than a typical conventional mortgage. Buyers may get into a new house with as little as a 3.5% down payment.

Using conventional loans, a lower down payment requires the borrower to get private mortgage insurance (PMI). This special type of insurance protects the lender just in case the borrower is not able to pay. The cost of PMI is added to the monthly payment until the amount of the loan reaches 20%. FHA loans, on the other hand, do not require PMI because they are backed by the U.S. government. Additional scrutiny is often required during the loan application process using an FHA loan.

What is required for an FHA loan?

FHA loan requirements are many of the same documents that are required for an FHA loan that any potential lender will want to see: employment history, appraisal, debt-to-income ration. A few additional stipulations are also attached to the FHA loan process. Buyers may have to bring 3.5% of the purchase price as a down payment, more if they have a credit score below 580. FHA loans are only available for the borrower’s primary residence that they will live in.

Credit requirements may also be slightly lower for FHA loans, given other factors demonstrate that the borrower is able to manage their money responsibly. Each lender looks at individual applications and may ask for additional documentation or explanations for this situation. They are often able to work with buyers with a lower credit score or shorter credit history than in other situations for a conventional loan.

How FHA Loans Work

• Purchase your home with as little as 3.5% down payment (compared to 20% required on most loans).
• 30-, 25-, 20- and 15-year terms are all available with fixed rates.
• Pay your mortgage loan off at any time without pre-payment penalties.
• FHA Loan Requirements have specific property requirements in addition to lending requirements.

Have questions?  Give us a call!  One of our mortgage specialists would be happy to answer all of your questions.

**Texas Home Loans is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.