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.
Mortgage Rate-Related Articles
Paying Discount Points
Some borrowers choose to pay “discount points” at closing, in exchange for a lower interest rate from the lender. This strategy works best for a long-term stay.
Getting the Lowest Rate
There are strategies you can use to get a lower rate from a lender. But first, you have to understand why mortgage companies assign different rates for different borrowers.