FHA Loans 101: 3 Major Requirements

If you have a strong understanding of the FHA loan requirements, you’ll experience a quicker and smoother loan application process. FHA loans provide homebuyers of all income levels the opportunity to purchase a home with lenient qualifying terms and lower down payment requirements. There are, however, three major requirements that prevents people from purchasing an unaffordable home.

Three Major Requirements

1. Debt-to-Income Ratio:There are two debt-to-income ratio requirements that FHA lenders will look at in order to determine if a buyer can afford a home:
   • Mortgage payment expense to effective income: Add your total mortgage payment and divide it by your gross monthly income. The maximum ratio to qualify is 31%.
   • Total fixed payment to effective income: Add your total mortgage payment and all recurring monthly debt and divide it by your gross monthly income. The maximum ratio to qualify is 43%.
2. FHA Credit: FHA loans are more lenient when it comes to qualifying terms, but there are still certain credit requirements applicants must meet. If you have no credit history, filed for bankruptcy, have a history of late payments, been foreclosed on, or sent to debt collections, it will be harder to get approved for a loan.
3. Application: Aside from financial requirements, there are a few FHA loan application requirements buyers must meet and present to their loan officer:
   • Address (past two years)
   • Social Security number
   • Names and location of your employers (past two years)
   • Gross monthly salary at your current job(s)
   • Information for all checking and savings accounts
   • Information for all open loans
   • Complete information for other real estate you own
   • Approximate value of all personal property
   • Certificate of Eligibility and DD-214 (for veterans only)
   • Current check stubs and your W-2 forms (past two years)
   • Personal tax returns (past two years), current income statement, and business balance sheet for self-employed individuals

If you understand the FHA loan requirements and are ready to apply for a loan, you can apply online with First Bank.* Have more questions about FHA loans? Visit the FHA’s website, or contact your local First Bank branch to learn more.

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*Equal Housing Lender. NMLS #474504. Loans subject to credit approval.

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Sources:
http://www.fha.com/fha_requirements_debt
http://www.fha.com/fha_requirements_checklist
http://www.fha.com/