FHA Guidelines
Buying a home can be daunting, which is why it helps to be as informed as possible. Learn all about the FHA loan process and what it takes to get approved.
An FHA loan is insured by the Federal Housing Administration. It comes with low down payments for borrowers and protects lenders from financial risk if the borrower defaults on the loan. Lenders have to meet certain criteria for their mortgages to be termed "FHA-approved," and borrowers must also satisfy a number of requirements to qualify for one of these loans.
The FHA has a maximum loan amount that it will insure, based on county and the property size. These caps, known as the FHA Lending Limits, are updated annually and are influenced by the conventional loan limits set by Fannie Mae and Freddie Mac. FHA loan limits for single-family homes in 2024 range from $498,257 to $1,149,825.
A big selling point for FHA loans is the low credit score requirement. Homebuyers with insufficient credit histories, who find it difficult to qualify for conventional loans with higher minimums, can more easily meet the FHA's minimum credit requirement of a 580 FICO score. Learn about what goes into the make-up of you credit score, and how you can work to increase it.
As with any mortgage, you'll incur some fees that need to be paid at the closing of your home loan. These charges are collectively called closing costs and they typically amount to 3% of the loan amount. FHA closing costs encompass all the fees and charges owed at the closing of a mortgage, such as appraisal fees, inspection fees, deposit verification fees, and home inspection fees.
In order to continue backing home loans, the FHA collects a monthly Mortgage Insurance Premium. These funds are used to protect the lenders—in that case that FHA borrowers default on their mortgages—and to fund the agency itself. Homebuyers with an FHA loan pay an Upfront Mortgage Insurance Premium, as well as the Monthly Mortgage Insurance Premium.
It's important that the FHA ensures that borrowers are not signing up for mortgages they cannot reasonably afford, which is why it is mandated that all potential homebuyers' debt-to-income ratios fall within certain set maximums. This helps lower the number of foreclosures since borrowers aren't bound to a mortgage they cannot afford.
FHA Loan Articles
August 14, 2023FHA loans typically require a minimum down payment of 3.5% of the purchase price of the home with the right credit score. This means that if you're buying a house for $240,000, you would need to make a down payment of at least $8,400.
August 10, 2023FHA loans have specific rules and requirements for borrowers who have filed for bankruptcy. The guidelines can change over time, so it's essential to consult with a qualified lender or FHA-approved counselor for the most up-to-date information.
August 3, 2023FHA loans are primarily designed to help individuals and families purchase homes for use as their primary residences. Rules for these loans generally discourage their use for investment properties or rentals. However, there are exceptions that come with strict rules.
July 29, 2023One crucial aspect of FHA loans that borrowers need to understand thoroughly is debt ratios. In this article, we look at how they can impact your ability to secure financing for your dream home. Debt ratios help lenders understand a borrower's creditworthiness and any risks associated with the loan.
July 21, 2023Investing in a multi-unit property can be an excellent way to build wealth through rental income and property appreciation. FHA multi-unit property loans make this opportunity more accessible to a broader range of individuals. You must occupy a unit as your primary residence within 60 days of closing the loan.
July 15, 2023To qualify for an FHA loan, you must meet certain employment requirements. In this article, we'll dig into the FHA loan employment requirements so that you can understand what's needed to get approved for this type of mortgage.
