How To Qualify for a FHA Loan

May 18, 2021 | Lifestyle

The first question to ask is, what is an FHA loan? An FHA loan, otherwise known as a Federal Housing Administration Loan, is a mortgage that is insured by the Federal Housing Administration and issued by an FHA- approved lender. They are designed and ideal for low – to – moderate-income borrowers; they require a lower minimum down payment and lower credit scores than many conventional loans.

They help turn the American Dream of homeownership into a reality. Not everyone can afford the strict financial requirements of the mortgage industry we are living in today. An FHA loan offers borrowers a greater opportunity to qualify for a loan to buy a home using a different set of requirements and guidelines that protect lenders and give home buyers a chance! One of the reasons lenders can offer the government program is that the borrower must pay for mortgage insurance, which ensures the lender cannot make good on their mortgage. 

So, how do you qualify for an FHA loan? The full list of FHA loan requirements is published in a handbook more than 1000 pages long. So, a summary is needed. 

FHA home loans are not just for a first-time buyer, contrary to popular belief. Since they have more relaxed qualifications than conventional mortgages, they are attractive to borrowers with lower credit scores. But, anyone, even a repeat buyer or a homeowner looking to refinance, can use it if they can meet the requirements. 

The minimum down payment depends on your credit score. With a credit score of 580 or higher, the minimum down payment is 3.5%. With a score of 500 to 579, the minimum downpayment is 10%.

Lenders also pay attention to your debt to income ratio, regardless of the type of mortgage you get. The debt to income ratio measures the percentage of your pre-tax income that you spend on monthly debt payments, including mortgage, credit cards, student loans and other obligations. The FHA requires a debt to income ratio of 50% if less. 

Regarding loan income requirements, there is no minimum or maximum salary you can earn that will qualify you for or prevent you from getting an FHA insured mortgage. However, you must:

  • Have a least two established credit accounts, such as a credit card and a car loan
  • Not have delinquent federal debt or judgements, take related or otherwise
  • Account for cash gifts that help with the down payment. These gifts must be verified in writing, signed and dated by the donor. 

Your FHA documentation must include proof of a social security number and provide original pay stubs, W-2 forms or valid tax returns as necessary. Of course, there are other stipulations, but an FHA approved lender will walk you through those further details. 

The property itself must meet certain requirements before you qualify for an FHA home loan, there are also loan limits, and FHA lenders have needs. Even if your situation doesn’t neatly fit within all the guidelines, a lender may still consider your loan application but will still review it more closely before approving or denying it. 


– a contributed post

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