FHA Home Loan Requirments

Many people make the mistake of thinking FHA home loan requirements are lower than those imposed by private lenders. This is largely untrue, though there are some circumstances where an FHA loan can be favorable for a less qualified buyer.

Credit Requirements

You will need excellent credit, such as an A rating of higher than 720, in order to qualify for an FHA guarantee on your home loan. This typically means you have a low amount of debt, a near perfect history of debt payment, and a long credit history. Even one missed payment of 30 days within the last two years can knock you down to a B credit rating.

Down Payment Requirement

The FHA does work with low income and first-time home buyers. This means the down payment requirement on the loan may be much lower than that on a private loan. With an FHA guarantee, you may be eligible for financing with as little as 3.5 percent down. An FHA loan additionally removes the requirement for private mortgage insurance; instead, a mortgage insurance premium is paid directly to the FHA as part of your monthly payment on the loan. Overall, FHA loans have lower capital requirements even though their credit requirements are high.

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