what are fha loan requirements 
your lender will evaluate your qualifications for an fha loan as it would with any mortgage applicant starting with a check to see that you have a valid social security number reside lawfully in the u s and are of legal age according to your state s laws fha loan criteria are less rigid in some ways than a bank s usual loan criteria however there are also some more stringent requirements whether or not it s an fha guaranteed loan your financial history will be examined when you apply for a mortgage fha loans are available to individuals with credit scores as low as 500 3 that is within the poor range for a fico score 8if 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 at least 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 9by comparison applicants typically need a credit score of at least 620 in order to qualify for a conventional mortgage 10 the down payment required by most banks varies between 3 and 20 depending on how eager they are to lend money at the time you apply as a general rule the lower your credit score and down payment the higher the interest rate you ll pay on your mortgage a lender will look at your work history as well as your last two years of payment history on your credit report 11people who fall behind on federal student loan payments or income tax payments will be rejected unless they agree to a satisfactory repayment plan for those debts 12 a history of bankruptcy or foreclosure may prove problematic too typically to qualify for an fha loan or any type of mortgage at least two years must have passed since the borrower experienced bankruptcy or foreclosure and they must have established good credit and got their financial affairs in order since then however exceptions can be made if the borrower has experienced extenuating circumstances such as serious illness 13mortgages must be repaid and the fha approved lender will want assurances that the applicant can achieve this a key to determining if the borrower can make good on their commitment is evidence of recent and steady employment this can be documented by tax returns and pay stubs if you ve been self employed for less than two years but more than one year you may still qualify if you have a solid work and income history in the same or a related occupation for the two years before becoming self employed 14your mortgage payments property taxes mortgage insurance and homeowners insurance premiums and any homeowner association fees must generally total less than 31 of your gross income 15 banks call this the front end ratio meanwhile your back end ratio which consists of your mortgage payment and all other monthly consumer debts should be less than 43 of your gross income 15an fha loan requires that you pay two types of mortgage insurance premiums mips an upfront mip and an annual mip which is paid monthly the upfront mip is equal to 1 75 of the base loan amount 16for example if you re issued a home loan for 350 000 you ll pay an upfront mip of 1 75 x 350 000 6 125 you can either pay the upfront mip at the time of closing or it can be rolled into the loan these payments are deposited into an escrow account that the u s treasury department manages if you end up defaulting on your loan the funds will go toward the mortgage repayment after the initial one time payment borrowers make mip payments every month those payments can range from 0 15 to 0 75 annually of the loan amount rates differ depending on the loan amount the length of the loan and the home s loan to value ltv ratio 17let s say you have an annual mip of 0 55 in that case a 350 000 loan would result in annual mip payments of 0 55 x 350 000 1 925 or 160 42 monthly these monthly premiums are paid in addition to the one time upfront mip payment you will make have to make annual mip payments for either 11 years or the life of the loan depending on the length of the loan and the ltv 17you can no longer take a tax deduction for the amount you pay in premiums this provision expired in 2022 you can still deduct mortgage interest though if you itemize your deductions rather than taking the standard deduction on your taxes 18usually the property you want to finance must become 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 row houses and condominiums within fha approved condo projects are all eligible for fha financing also you will need a property appraisal from an fha approved appraiser and the home must meet certain minimum standards homes that are in such disrepair that they do not meet the fha s requirements are deemed uninsurable if the home doesn t meet these standards and the seller won t agree to make the required repairs you must pay for the repairs at closing in this case the funds are held in escrow until the repairs are made 19