Welcome to the FHA Loan Information Center. This page offers a wealth of information about the FHA mortgage insurance program. It is a work in progress, with new articles being added every week. The Information Center is provided as a resource for home buyers and borrowers specifically, but lenders may find it useful as well.
The Basics: FHA Loans at a Glance
Not familiar with the FHA loan program? Read the articles below for a basic introduction.
What Is an FHA Loan?
If you’re not familiar with the federal government’s mortgage-insurance program, this article is a great place to start. It explains how these loans work.
Benefits of FHA Loans
These mortgage program isn’t right for everyone. But it does offer advantages for certain types of borrowers, especially those who don’t have a lot of money saved for a down payment.
Disadvantages of Using FHA
This loan program is not for everyone. For some borrowers, the disadvantages far outweigh the benefits. This article explains the possible disadvantages of using an FHA loan to buy a house.
Difference Between FHA and Conventional
This article examines the pros and cons of both types of home loans, and explains how you might choose the right product for your particular situation.
Why It’s Popular With First-Time Buyers
The FHA loan program is not limited to first-time home buyers. But it does offer some enticing advantages for this particular group, such as a low down payment.
FHA Requirements for Borrowers
What does it take to qualify for an FHA-insured home loan? In short, borrowers need good credit, a manageable level of debt, and a down payment of at least 3.5%. Learn more below.
Credit Score Requirements
Generally speaking, borrowers who use this program need a credit score of 500 or higher. To qualify for the 3.5% down-payment option, you’ll need a score of 580 or higher.
Debt-to-Income (DTI) Ratios
When you apply for a loan, the lender will compare your monthly income to your recurring monthly debts. This is known as the DTI ratio, and it’s a key factor in loan approval.
Trends for Back-End Debt Ratios
The article directly above explains HUD’s official guidelines for borrower debt ratios. This article is based on an informal survey of lenders regarding back-end DTI trends.
Borrowers who are self-employed have some additional “hoops” to jump through, when it comes to applying for an FHA loan. Here’s an overview of HUD’s requirements.
Allowable Closing Costs
Mortgage lenders (and other third parties) can charge a variety of fees when generating an FHA-insured home loan. Collectively, these are referred to as closing costs.
Frequently Asked Questions
We get a lot of questions from our readers, and we try to answer as many of them as possible. Here are some of the most frequently asked questions about the FHA loan program.
Can my down payment be gifted?
In a word, yes. One of the benefits of using an FHA loan to buy a house is that the down payment funds can be gifted by a family member, a friend, or other approved donor.
How long do FHA loans take to close?
The length of time between the application and final closing can vary based on several factors. It might take anywhere from two weeks to two months, depending on these variables.
Why would I be turned down for FHA?
Borrowers can be denied financing for many reasons. Understanding these reasons is the first step to avoiding them. This article explains some of the most common reasons for rejection.
What if the appraisal is below sale price?
When you apply for an FHA loan, your mortgage lender will have the home appraised to determine its value. And there’s a chance the home will appraise for less than the purchase price.
Is there a credit check before closing?
Your lender will check your credit reports and scores when you apply for a loan. But they might check it again a few days before closing. So it’s best to preserve the status quo in between.
If I’m pre-qualified will I be approved?
Pre-qualification is only the start of the mortgage approval process. There are many other things that have to happen before you get a final approval from the lender.
How much can I qualify for and afford?
The amount the lender is willing to give you will depend on several factors. Your debt-to-income ratio, or DTI, is one of the most important factors that will influence their decision.
How long do I pay mortgage insurance?
In the past, borrowers were able to cancel their mortgage insurance premiums (MIP) once they reached a certain level of equity. But that all changed in 2014.
Are FHA loans easy to obtain?
It is commonly said that FHA is easier to qualify for, when compared to conventional or “regular” home loans. There is some truth to this. But you’ll still need to have good credit.
Which banks and lenders offer FHA?
Many banks and mortgage lenders offer these loans, because they’re very popular among home buyers. All of the “big banks” offer them, as well as many smaller and local lenders.
How do I get the lowest rate?
Every borrower wants to get the best possible interest rate, because it can save you thousands over the long term. But how do you do it? Here are some strategies you can use.
Does FHA offer adjustable-rate loans?
Most borrowers use fixed-rate mortgages because of the predictability they offer. Others prefer to use adjustable loans to get a lower interest rate. FHA offers both types.