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qualify for FHA loan

6 Keys to Qualify for a FHA Loan Program in 2018

By Joe Silver

Many people aspire to own a home of their own and stop paying rent and FHA loan qualifications remain realistic for many consumers in the United States. The year 2018 is a good year to pull the trigger on your first home!

Why? Because rents throughout the country continue to be at a near record high. Paying someone else's mortgage for them is not a wise long term financial decision.

Also, property values are going up in most markets. By buying your own home, you can build equity in your property and build your wealth over time.

And, interest rates are still very low historically, even though they have inched higher from a year ago. Some experts think we will see over 5% interest rates by the end of 2018. So, you really should consider getting a home loan sooner than later.

But what if your credit is not that good? In the past, many people would have been prevented from buying a home. But FHA home loans make it much easier for millions of people to buy a home today. It's important to determine how to qualify for FHA loans before you make an offer on a house.

FHA loans are guaranteed by the Federal Housing Administration. Thus, lenders are more willing to extend credit to people with credit scores well under 700, and also may extend credit to those who have bankruptcies and foreclosures in the recent past.

While FHA standards are very flexible, you will still need to follow some basic rules to qualify for one of these loans. Continue reading to learn about the keys for FHA mortgage qualifications in 2018:

1. Have Enough Verifiable Income

The days of no document home loans are pretty much dead and gone. Back in the day, it was quite easy to be approved for a home loan with just stated income. But these days, even FHA-loan qualifications from approved finance companies will want to see that you have documented and verifiable income.

To please the lender, you should have pay stubs and tax returns that show that you have steady income. Three months of stubs and two years of tax returns usually are enough.

If you are self-employed, no worries. You just need to show tax returns and possibly a P&L statement for the current year to date.

In most instances, FHA loan qualifications are available when lenders see that you have been in the same job or industry for at least a couple of years.

2. Be Able to Make the Payments

FHA does not care as much about your credit score. What they do care about is documented proof that you can afford the loan payment and to pay your other debt obligations.

The general FHA guideline for 2018 is that your mortgage payment may not be more than 35% of your gross monthly income. Also, your mortgage payment AND your other monthly debt obligations may not be more than 48% of your monthly gross income.

3. Have at Least 3.5% Down-Payment

With the exception of VA and USDA loans, there are no more 100% financing home loans in 2017. The good news is that FHA loan qualifications only require most borrowers to put down 3.5%.

However, in the real world you will still need to have approximately 6% of the home's value stored up. You still need to pay closing costs and for the upfront FHA mortgage insurance premium of 1.75% of the value of the property.

You may be able to save here if you can convince the home owner to pay part of your closing costs. Some current owners may be desperate to sell and they may agree to front 1-2% of your closing costs.

4. Have Reestablished Credit History

FHA is quite forgiving on credit scores. You technically may get an FHA loan with a 500-credit score, although many more lenders will work with you at a 640 score. At 680, you will be in great shape and should have plenty of lenders to choose from.

If you do have a score under 580, you likely will need to make a 10% down payment.

It is ok to have a foreclosure or bankruptcy 24 months ago or more. However, you will probably need to show the underwriter that you have made efforts to recover and get back on your financial feet. You should have at least two open credit lines, such as a car loan and credit card that you have been making timely payments on for the last 12 months.

The bar on credit score is fairly low to clear, but FHA does want to ensure you are currently financially stable enough to pay on a mortgage.

5. Buy a Home That FHA Insures

FHA sets annual limits on how much you can borrow and still qualify for FHA loan programs. In most parts of the US, the current limit is $625,000, but it can be higher in high cost parts of the country.

If the home is more expensive than that, FHA will not insure the property in most cases. So, you cannot qualify for an FHA loan for homes above that amount.

6. Get the Right FHA Loan

You can get a fixed or variable rate FHA loan, but fixed loans are generally the most popular today. Most home buyers prefer a fixed rate as first of all, the FHA rate is very low in most cases. Second, a variable rate is higher risk to the consumer.

You also can get a 15 or 30-year loan, but you will need to make sure that you have enough income to afford the higher 15-year loan payment.

The Bottom Line with FHA Loan Qualifications Today

Qualifying for a FHA loan is really one of the easiest ways to buy a home with a mortgage today. You do not need to have great credit, the down payment amounts are very low for most borrowers, and the debt to income ratio criteria is very reasonable. Even if your DTI ratios are above the FHA standard, you may be able to qualify for an exception if you make enough money each month.

If you follow the above guidelines about qualifying for a FHA mortgage, you probably can make 2018 the last year that you are paying rent. Now you will be able to own your own home and live the American Dream!

FHA mortgage qualifications

Top 5 FHA Mortgage Qualifications

How to Qualify for a FHA Mortgage Loan in 2018

People who are in the market for a home may want to think about getting an FHA loan. These loans are insured by the Federal Housing Administration, and because they are guaranteed against default, more FHA-approved lenders are willing to extend credit to those who may not otherwise qualify. Qualifying for FHA loans is often a good bet for people with lower incomes and those with past credit problems.

How can you qualify for an FHA loan? Please keep reading to learn what the FHA qualifications are for 2018:

Minimum Credit Score Required

FHA mortgages are very flexible on the credit score needed to get a loan approval. Credit scores can range from 350 to 850, with higher being better.

To qualify for a conventional, non-FHA loan, you often need to have a credit score of at least 680 and above 700 is better. With FHA, you can qualify for a loan with a lower score.

Actually, FHA does not set an exact minimum score; the FHA-approved lender may set a minimum credit score, however.

For people with very low scores between 500-579, you may be able to get an FHA approval, but the loan to value will need to be 90% or less. This means that you will need to put down at least 10% to buy the home.

If your score is above 580, you will be able to get a home loan, pending approval, with only 3.5% down. People who have credit scores above 620 and 640 have more loan options available to them.

Remember, you can get an FHA loan in some cases even if your score is in the low 500s. But you will definitely have more loan options with a score at 620 or higher. Check for first time home buyer bad credit loans.

3.5% Minimum Down Payment Needed

A major reason so many people want to qualify for a FHA loan is that it is possible to get into a home with only putting down 3.5% of the price of the house.

If you are getting a $200,000 house, you will only need a down payment of $7500. You also will need to have funds in the range of 3-5% for closing costs, but this is a very low amount for buying a home today.

There are no more 100% financing programs today, with the exception of VA and USDA house loans. The 3.5% down loan from FHA is the best game in town.

Remember, if your FICO score is under 580, you will likely need to put down 10% at the closing table.

Income Requirements Must Be Met

The Department of Housing and Urban Development does not actually have income requirements for a loan from FHA. There is no minimum standard income, but you do need to document that you have enough income to pay both your monthly debts and your mortgage.

Usually, you will need to have a debt to income ratio of no more than 43%, but you may be approved for a debt to income ratio of 45%.

FHA lenders are usually more flexible with income requirements than conventional lenders, but you will need to meet the standard of the individual lender.

Related to income, you must also show that you have stable enough employment that you can pay the loan each month.

Must Have a Clear CAIVRS Report

To get an FHA loan, it is important to have a clear report from CAIVRS. This is the Credit Alert Verification Reporting System or CAIVRS. This is a federal government database that tracks if you own money to the US government. This can include FHA loans, federal student loans, and SBA loans.

You can qualify for an FHA loan if the delinquency has been paid in full. Or, if you have a repayment plan set up, you will be able to qualify for FHA loans.

However, if the delinquency is from another FHA loan, you must wait at least 36 months from the time that HUD paid off the insurance claim from the lender.

Must Have Gift Letter for Down Payment Funds

If you are getting your FHA loan down payment in the form of a gift, this is allowed by the US government. However, you will need to get a gift letter from your relative or friend who is gifting the money. It must state that the gift is just that – a gift – and you are not obligated to pay it back at any time.

You also will need to show proof that the money went from your relative's or friend's account and into your account.

Lender Must Be Approved By FHA

As you apply for an FHA-loan, you need to clarify that the lender has been approved by FHA. There are thousands of FHA mortgage companies, but not every lender is approved.

Know that each lender will have different income, credit and down payment criteria, so it will pay to shop around a lot.

Need to Be Able to Afford Mortgage Premiums

One of the down sides of an FHA loan qualification is that you have to pay for mortgage insurance. Mortgage insurance is required in case you were to ever default on the loan; this will allow the mortgage lender to be reimbursed by FHA.

You need to have sufficient income so that you can pay the loan's principal, interest, taxes and mortgage insurance premium.

You need to pay usually .85% of the loan amount per month, if you have a 30-year fixed loan. Also, you must pay 1.75% up front of the loan amount. This can be wrapped into the mortgage. Today mortgage insurance is forever with FHA, unless of course you refinance out of this government insured loan.

You have the best chance of being approved for an FHA mortgage than just about any other type of mortgage loan. The income, credit and down payment requirements are very reasonable and flexible.

Please keep the above qualification standards in mind as you are about to apply for an FHA loan. Doing so will maximize the chances that you can be approved for an FHA loan, and will be able to move into your dream home very soon. provides a news and information service by offering editorial content related to the housing and mortgage industry. FTHF has no affiliation with HUD, FHA or any other government agency. This site does not guarantee FHA loan qualifications of any kind. This website is not responsible for the accuracy of information or responsible for the accuracy of the rates, APR or mortgage guidelines posted by advertising banks, lenders and brokers.

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