FHA Guidelines

FHA loan programs have historically been considered a First Time Home Buyer program.  With low down payment requirements, FHA is a great option not only for first time home buyers, but also for homeowners with little equity left when selling a current home to make a large down payment on a new home.  The interest rates on FHA loans are competitive with interest rates on conventional loans EVEN with the lower down payment requirements.

• Only a 3.5 percent down payment is required.
• Sellers can credit up to 6% for closing costs.   This will soon be reduced to 3% sometime in Summer 2010.
• Property purchase must be primary residence.
• FHA Loan Limits vary by County.   Click here to look up your county limits.
• Lower monthly mortgage insurance premiums and, under certain conditions, automatic cancellation of the premium.
• More flexible underwriting criteria than conventional loans.
• FHA allows for all funds for the down payment and closing costs to be gifted.
• FHA allows for a Non-Occupant Coborrower to help with qualifying.
• FHA allows for higher debt-to-income ratios than Fannie Mae Conventional Financing.
• FHA will consider lending to home buyers 2 years after a Chapter 7 bankruptcy has been discharged.
• FHA will consider lending to home buyers 3 years after a home foreclosure.
• FHA will consider lending to home buyers 3 years after a delinquent short sale.
• FHA will consider lending to home buyers that had a short sale where the loan was current, immediately after the short sale has closed.
• Loans are assumable to qualified buyers.

NOTE: Many lending institutions are requiring borrowers to have a 620 credit score or higher in order to qualify for an FHA loan. However, there are still a few "true" FHA lenders that have no minimum credit score requirements.   However, the qualifying with a credit score under 620 is much more stringent.   Those lenders still accepting credit scores below 620 require that there are no credit lates in the past 12 months and may require collections to be paid off.   In Summer 2010, the down payment requirement for borrowers with a credit score below 580 will be increased to 10%.

We have outlined here a portion of all the FHA loan underwriting guidelines.   It would be impossible to include everything here.  So if a particular question you have is not answered, please call, email or initiate a chat.