How Do I know if I Qualify for an FHA Loan?

by Jesse Marks 12/22/2019

FHA loans have long been a valuable resource for Americans who want to fulfill their goal of homeownership but who don’t have the benefit of a lengthy credit history and equity.

If you’re hoping to buy a home in the near future but want to explore all of your options in terms of financing, this article is for you.

Today we’re going to talk about FHA loans and how to know if you qualify for one.

What are FHA loans?

FHA loans are issued by private mortgage lenders across the country, just like regular mortgages. The difference, however, is that an FHA loan is “guaranteed” by the federal government.

Lenders decide your borrowing eligibility, and how much you can borrow, by determining risk. If you don’t have a sizable down payment (oftentimes 20% or more) and you have a low credit score, most mortgage lenders will see you as a risky person to lend to.

When you get an FHA loan, however, the federal government assumes some of that risk, allowing you to secure the loan anyway.

This means you can buy a home with a low credit score, a smaller than usual down payment, and save on some closing costs.

How do I qualify for an FHA Loan?

To find out if you qualify for an FHA loan, you’ll head to the same place as a traditional mortgage--a mortgage lender. Oftentimes, you can simply call or visit the website of lenders to get the process started.

As with all things, it’s a good idea to shop around for a mortgage lender. Their offerings will be largely similar, but there might be minor differences that make one better than another for your particular circumstances.

Down payment requirements

To secure an FHA loan, you will need to make a down payment of at least 3.5%. However, this low down payment comes with a price. You’ll typically be required to pay private mortgage insurance (PMI) fees on top of your accruing interest for your loan.

Credit score requirements

While you can often secure a mortgage with a lower credit score through an FHA loan, there are still some requirements. To secure a loan with the lowest possible down payment (3.5%), you’ll need a credit score of 580 or above.

Previous homeowners and FHA loans

A common misconception about FHA loans is that they are only for first-time homeowners. However, you can still qualify for an FHA loan if you’ve owned a home before as long as it has been three years since you’ve had a foreclosure or two years since filing for bankruptcy.

If you meet these three conditions, you should be able to secure an FHA loan through a traditional mortgage lender.

About the Author
Author

Jesse Marks

I spent years as a Law Enforcement Officer with the DC Housing Authority Police Department; it was my duty, and a privilege, to protect and to serve the public interest. I use that same dedication and commitment to my clients advantage. With the proper information and guidance, your home buying or selling, adventure...will not be intimidating. INTEGRITY Buying or selling a home is the most important transaction in your life. Because of that, it is important that you work with someone with integrity, that you trust, and feel is a market expert. People trust me with their most-valuable asset. It's a responsibility I take very seriously. I know that your success is my success. LOCAL EXPERTISE I offer local expertise in a home market tailored to meet your needs. As a local professional, I know the neighborhoods, schools, market conditions, zoning regulations and local economy. I will do the leg work, keeping you up-to-date with new listings and conditions as they impact the market. I will make the process as pleasurable and stress-free an experience for you as I can. SUCCESS I don't measure my success through awards received or achievements, but through the satisfaction of my clients. Whether you are looking to buy or sell your home, I will provide sound and trustworthy advice to help you achieve your real estate goals. Let me guide you through the complexities of buying or selling your home, eliminating hassles and stress. I look forward to working with you.