• Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Mortgages
    • Mortgage Insight
    • FHA Loans
    • Check Rates Now
    • Check Eligibility
  • Home Services
    • Home Security
    • Home Warranty
    • Solar
    • Roofing Quotes
  • Debt
    • Debt Insights
    • Debt Relief
    • Debt Relief Quiz
  • Insurance
    • Insurance Tips
    • Auto Insurance Quotes
    • Home Insurance Quotes
    • Life Insurance Quotes
  • Credit Cards
    • Travel Credit Cards
    • Cash Back Credit Cards
    • Credit Card Articles
  • Articles
  • Subscribe
Wise Money Life

Wise Money Life

Helping Consumers Make Wiser Financial Decisions

What Is an FHA Loan?

Last Updated November 18, 2022 Leave a Comment | Ad Disclosures | Editorial Disclosure

FHA loans are often popular with first time homebuyers. These government backed loans are insured by the Federal Housing Authority (FHA). Compared to a conventional loan, FHA loans require a lower credit score and down payment. This makes them more attainable for potential homebuyers.

What Is an FHA Loan

There are a few options with FHA loans when it comes to credit scores and down payments:

TRENDING: Homeowners Given Huge Home Warranty Discount in 2023 – Get Your Free Quote in Seconds

  • Lower Credit Score, Higher Down Payment: You can qualify for an FHA loan with a credit score of 500, but you will need to make a 10% down payment.
  • Higher Credit Score, Lower Down Payment: With a credit score of at least 580, buyers can take advantage of the 3.5% down payment requirement.

An FHA loan provides a significant amount of flexibility for borrowers. However, borrowers will need to pay private mortgage insurance (PMI) to protect the lender. This is due to the lower down payment requirements.

Check FHA Mortgage Rates Now >>

FHA Loans vs Conventional Mortgage Loans - Wise Money Life

Requirements for an FHA Loan

  • Employment History: Applicants for an FHA loan must be able to provide 2 years of history proving steady employment.
  • Bankruptcies and Foreclosure History: Borrowers seeking an FHA loan must not have a bankruptcy or foreclosure within the past 2 years. A positive credit history must be reestablished as well.
  • Pay Stubs: Borrowers will need to prove income and employment through recent pay stubs.
  • Tax Returns: Most lenders will want to see the previous two Federal tax returns.
  • Bank Statements: Borrowers will typically need to provide 2-3 recent bank statements.
  • Down Payment Requirement: Borrowers must put down 3.5% to 10% (depending on your credit score).
    • Gifting Down Payments: Family members can gift down payments, which can be a big help for first time home buyers.
  • Primary Residence: The FHA loan must be used for the borrower’s primary residence.
  • Front End Debt Ratio: Excluding the mortgage amount, the borrower’s debt payments shouldn’t exceed 31% of their monthly income. Some lenders might allow up to 40%.
  • Back End Debt Ratio: The mortgage and all other monthly debt payments must not exceed 43% of the borrower’s gross monthly income. Some lenders will allow up to 50%.

Check Today’s FHA Mortgage Rates >>

Is an FHA Loan Right for Me?

Borrowers that do not have much money saved or are just establishing their credit might be a great fit for an FHA loan. First time homebuyers often use FHA loans, even with great credit. The lower mortgage down payment requirements are attractive to many buyers. Future homeowners might choose an FHA loan during times of higher interest rate as well.

TRENDING: Homeowners Given Huge Home Warranty Discount in 2023 – Get Your Free Quote in Seconds

Homeowners can use an FHA loan to buy again, but the home will need to be a primary residence. Current homeowners with an FHA loan might want to consider refinancing into a conventional loan. Home prices have risen consistently over the past few years, allowing refinancing opportunities to look more attractive for some.

Get Started for Free >> Compare FHA Lenders

Filed Under: Mortgage Tagged With: fha, first time homebuyer

Reader Interactions

Leave a Comment Cancel

sidebar

Blog Sidebar

Popular Articles

Understanding the Snowball vs. Avalanche Debt Repayment Methods

Maximizing the Benefits of Travel Credit Cards: Avoid Common Mistakes, Seize Opportunities

Understanding the Different Types of Retirement Accounts

Millennial Maze: Navigating Homeownership in Today’s Market

The Top Airport Lounges in the US and How to Get Access

Mortgage Rates

Check Now

Insurance

Home Insurance
Auto Insurance
Life Insurance
Insurance Articles
Home Insurance Quotes
Auto Insurance Quotes
Life Insurance Quotes

Retirement Calculator

GO

Wise Money Polls

Poll: Which Financial Goal Are You Currently Prioritizing?

Footer

About Us

About Us
Contact Us
Ad Disclosures

Join Our Weekly Newsletter

Hi there. We already have you added to our newsletter.

Copyright © 2023 WiseMoneyLife.com

Privacy Policy and Terms of Use | Privacy Policy Notice - California | Ad Disclosures | Opt-out of Email


Important Disclosures: This site contains affiliate and partner links and may receive compensation for referrals or purchases made through our links. Contents of this website are copyrighted property of the owner of this site. All other trademarks, logos, and service marks (collectively the "Trademarks") displayed are registered and/or unregistered Trademarks of their respective owners.


Additional Disclosures: WiseMoneyLife.com has partnered with CardRatings for our coverage of credit card products. WiseMoneyLife.com and CardRatings may receive a commission from card issuers.