Federal House Administration Home Loans

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FHA Loan Requirements

FHA loan or FHA insured loan is possibly the easiest and most convenient loan to get. Unlike some might think, the Federal Housing Administration doesn’t lend the home loan. Instead, it insures it to the lender. Meaning that if the lender doesn’t get the money back, the FHA will compensate it.

That is why the lenders require a very low downpayment than conventional mortgages. Not every lender has FHA loans available. Big corporations like Citi, Bank of America, Navy Federal Credit Union, PNC Bank, and Quicken Loans have FHA loans.

The requirements for an FHA Loan aren’t that bad, especially when compared to a regular home loan.

FHA Loan Requirements

As of 2020, the requirements are the same as last year.

FICO® score of at least 500
Mortgage Insurance Premium
The home must be the borrower’s primary residence
The borrower must have steady income and proof of employment

The FICO® score is between 500 and 579 this means you’ll make a downpayment of 10%. If your FICO® score is above 580, the downpayment percentage drops to 3.5%.

What is Mortgage Insurance Premium? (MIP)

Upon getting your loan, you’ll have to pay two types of insurance premiums. One of which is the Upfront Mortgage Insurance Premium and the other one is Annual Mortgage Insurance Premium. Don’t let the name of it distract you. The Annual MIP is calculated annually but it is paid monthly.

The Upfront MIP is a set percentage for that given year. For 2025, it is 1.75% so if you get a $200,000 FHA loan, you’ll have to pay $3,500. You can pay this amount when you get the loan or at the time of closing.

Annual MIP

The Annual MIP, on the other hand, is paid every month. The percentage of the Annual MIP depends on your loan amount and the length. It is usually between 0.70% and 1.00%. If it were to 0.85%, you’ll pay about $1,700 every year which will be added to your home loan. So $1,700 divided by 12, you’ll have to pay $141 in extra for your home loan.

Who can get an FHA home loan?

As long as you have a stable income with a FICO score of at least 500 and the house you’re purchasing with the loan is going to be your primary residence, you will qualify for an FHA loan. In addition, your total income-to-debt ratio must be below 43% while the monthly housing payments must be less than 31% of the monthly gross income.

Can I make too much to qualify for an FHA loan?

There is no maximum income to qualify for an FHA loan. There is no minimum income requirements also. What matters is your credit score, a stable income, and validation that the house you’re buying is going to be your primary residence.

My credit score is 500. Can I get an FHA loan?

Borrowers with a 500 credit score are perfectly eligible for an FHA loan but it would be better if you apply after increasing it. With 500 credit score, you can get an FHA loan but won’t be eligible for the 3.5% down payment. For that, your credit score must be at least 580. Any borrower with a credit score under 580 must place a 10% down payment.

Applying for an FHA Loan

There is no magical trick for getting an FHA loan, simply apply for it as you would normally apply for a regular home loan. You can submit your loan application to an FHA-approved lender online or in-person.

To not hurt your credit score, make sure that you are qualified for the FHA home loans. Read the requirements from here again.