FHA Frequently Asked Questions (FAQs)

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 FHA loans.

Questions About Eligibility Requirements

The questions and answers below address the minimum requirements for borrowers.

How do I qualify for an FHA loan?
To qualify for this program, borrowers generally need to have good credit, a down payment of at least 3.5%, a manageable level of debt, and steady income that is sufficient to repay the loan. Those are the minimum requirements.

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.

What’s a good credit score for borrowers?
The official minimum credit score for this program is 500, according to HUD. But mortgage lenders have the final say, and most won’t go that low when approving borrowers. Recent data suggest that 600-and-up is a good score for FHA.

What’s the average credit score?
As mentioned above, the lowest possible score for an FHA-insured mortgage loan is 500. But many of our readers have also inquired about the average score among borrowers who use this program. It’s around 683 for home buyers, according to Ellie Mae.

Are they just for first-time buyers?
There is a common misconception that FHA-insured mortgage loans are reserved for those who are buying their first home. This is not true. People who have owned a house in the past can also use this program, as long as they meet the basic criteria.

Is FHA just for low-income borrowers?
This is another misconception about the program. It’s popular among borrowers with low to moderate income, because it allows for a relatively low down payment. But it’s not limited to this group.

How much income is needed to qualify?
The Federal Housing Administration does not have an official minimum income requirement for this program. But they do have specific limits regarding the borrower’s “debt-to-income” or DTI ratio. This article explains how it all works, from a borrower’s perspective.

Do I make too much money to qualify?
There are no specific income requirements for FHA loans. So, technically speaking, you cannot make “too much” money to qualify. In fact, the Federal Housing Administration will insure loans over $1 million in some areas.

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.

Down Payment Questions

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.

The Process: Application, Underwriting and Closing

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.

How often do they get rejected?
There are no statistics that show how often FHA loans get denied or rejected during the underwriting stage. But industry data does reveal a slightly lower “closing rate,” when compared to conventional mortgages.

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.

Can the seller pay my closing costs?
Current HUD guidelines allow the seller to contribute money toward the home buyer’s closing costs, up to 6% of the sale price in most cases. But the seller is not required to do this.

Home Appraisals and Inspections

Is a home inspection required?
HUD does not require a home inspection to be performed when an FHA loan is used. But they do require an appraisal to determine the market value, and future “marketability,” of the property. This article explains the difference between these procedures.

When does the inspection occur?
You don’t have to have the home inspected when using an FHA loan. That’s not required. But it’s still a smart investment. If you choose to have a full inspection, it will take place shortly after the offer has been accepted.

Why would a home be rejected?
There are several reasons why a particular house might be turned down for FHA mortgage insurance. If it does not meet HUD’s minimum property requirements, it might not be approved. Low appraisals are another potential problem.

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.

Mortgage Insurance Premiums (MIP)

Why do they require mortgage insurance?
The Department of Housing and Urban Development requires borrowers who use FHA loans to pay mortgage insurance premiums. They do this to fund the program, and to maintain their cash reserves at the congressionally mandated level.

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 a couple of years ago. Now, it might follow you for the “life” of the loan.

Refinancing Your Loan

Can an FHA loan be refinanced?
A Federal Housing Administration home loan can be refinanced much the same as any other type of mortgage, as long as you meet some basic requirements. In fact, the process might be even easier if you use the “streamline” refinance.

Other / General Questions

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.

How are FHA rates determined?
This is actually a two-part question, and we have answered both parts of it in this article. It explains how rates are set across the board, and how lenders will determine yours.

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.