What Is a Federal Housing Administration (FHA) Loan?
A Federal Housing Administration (FHA) loan is a government-backed mortgage with fewer financial requirements than conventional mortgages. FHA loans require a lower minimum down payment than many conventional loans, and applicants may have lower credit scores than is usually required.
FHA loans are designed to help low
How Does an FHA Loan Work?
Homes That Qualify for an FHA Loan
What are the FHA Loan Limits?
FHA loans allow home buyers to borrow up to a certain percentage of a home’s value, depending on their credit score. Home buyers who have a credit score over 580 can borrow up to 96.5% of a home’s value with an FHA loan.
If your credit score falls between 500 and 579, you can still get an FHA loan as long as you can make a 10% down payment.
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What are the FHA Loan Limits?
Homes That Qualify for an FHA Loan
What are the FHA Loan Limits?
The maximum amount you can borrow for an FHA depends on the county the home is in.
According to the Department of Housing and Urban Development, the maximum FHA loan amount in high-cost areas is $1,149,825 in 2024. In lower-cost areas, the FHA limit is set based on county property values. These are the limits for one-unit properties. If you have multiple units, limits may be higher.
FHA Interest Rates
Homes That Qualify for an FHA Loan
Homes That Qualify for an FHA Loan
FHA interest rates can be competitive compared to conventional mortgages. This is because the government backing allows lenders to offer a lower rate. The rate depends on several factors including the prevailing interest rates, your income, credit score, the amount you plan to borrow, your down payment amount, DTI ratio, and more.
Homes That Qualify for an FHA Loan
Homes That Qualify for an FHA Loan
Homes That Qualify for an FHA Loan
Usually, the property financed must be your principal residence and must be owner-occupied. In other words, the FHA loan program is not intended for investment or rental properties.
Detached and semi-detached houses, townhouses, rowhouses, and condominiums within FHA-approved condo projects are all eligible for FHA financing.
Credit Score and Down Payment
If your credit score is between 500 and 579, you may be able to secure an FHA loan, assuming you can afford a down payment of 10%
If your credit score is 580 or higher, you can get an FHA loan with a down payment of as little as 3.5%
History of Honoring Debts
A lender will look at your work history for the last two years and your payment history for bills such as utility and rent payment.
Proof of Steady Employment
A lender will review tax returns, a current year-to-date balance sheet, and a profit-and-loss statement.
If you have been self-employed for less than two years, but more than 1 year, you may still qualify if you have a solid work and income history in tha same or a related occupation before becoming self-employed.
Sufficient Income
Your mortgage payment, HOA fees, property taxes, mortgage insurance, and homeowners insurance should be less than 31% of your gross income. Lenders call this front-end-ratio.
Meanwhile, your back-end-ratio, which consists or your mortgage payment and all other monthly consumer debts, should be less than 43% of your gross income.