FHA Loan Requirements - Do You Qualify?

FHA loan requirements have been designed with high-risk borrowers in mind. The Federal Housing Administration supports Americans who have problems meeting standard mortgage loan requirements - administered by Housing and Urban Development (HUD), the program provides mortgage guarantees on behalf of high-risk borrowers.

FHA Loan Requirements: Required Income

While there are no minimum FHA loan requirements for income, there ore other requirements. Assessors will be looking at the past three yers or more, to determine whether you have a steady income and a track record of paying your bills on time. FHA loan requirements allow unemployment compensation, VA benefits, military pay, Social Security income, alimony, seasonal pay, child support, retirement pension payments, and rent paid by family to be considered income sources. FHA loan requirements may consider bonus pay, part-time pay, and overtime to constitute part of your assessed income, if they are reasonably regular amounts.

FHA Loan Requirements: Debt-to-Income Ratio

The FHA considers 29% of your income the maximum allowable for housing costs and a total of 41% of your income the maximum to be spent towards all long-term debt combined.

Conventional mortgage lenders, on the other hand, would take a percentage point off the housing ratio, bringing it back to 28%, and a whole five percentage points off the total long-terms debt ratio, requiring no more than 36%.

FHA Loan Requirements: Down Payment

FHA loan requirements state that you must have a downpayment of at least 3% of the purchase price of the home, but the FHA says this cash may be a gift or grant. Most mortgage lenders will expect to see a borrower's own cash providing at least 3% of a 3%-5% down payment, especially in a non-standard lending situation.

FHA Loan Requirements: Credit Score

FHA loan requirements are very loose when it comes to credit scores, offering a viable alternative to an entire segment of the population. You can be approved for an FHA loan without a credit history. Consult your FHA lender for details on how to establish your eligibility for an FHA loan if you prefer to pay debts in cash or are too young to have established credit.

FHA loan requirements have a much more realistic view of credit scores than the average bank. If you do have bad credit, the FHA allows you to re-establish credit if all judgements and tax liens have been paid, and two years have passed since a bankruptcy has been discharged, or if arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue. Even if you have had a difficult housing loan history, the FHA may also allow you to qualify for a mortgage once three years have passed since a foreclosure or a deed-in-lieu has been completed.