Requirements For An FHA Home Loan | FHA Home Loan Rates
Requirements for an FHA home loan are often easier to qualify for when it comes to credit than conventional loans. Qualifications for an FHA home loan depend on the three Cs of underwriting, which is credit, capacity, and collateral. Eligibility for an FHA home loan is determined by the Automated Underwriting System (AUS) and a underwriter finalizing the findings, with a clear to close, by reviewing credit, income, assets, and property. FHA home loan rates are often more favorable for borrowers with less than perfect credit than other mortgages. The minimum down payment requirement for an FHA home loan is 3.5% for credit scores 580 FICO or higher and 10% for credit scores under 580 FICO. The minimum down payment requirement can be less when a borrower qualifies for an FHA grant program.
Requirements For a FHA Home Loan
- Credit reputation is a factor when determining qualifications for a FHA home loan.
- The minimum down payment requirement for a borrower with a 580 FICO or higher is 3.5% and 10% with a credit score under 580 FICO.
- Foreclosure, deed-in-lieu, or short sale requires seasoning and is measured by the final property transfer or completed sale date.
- Must be three years from the FHA case # assignment.
- At least 2 years of time must be elapsed since a Chapter 7 bankruptcy discharge date.
- A Chapter 13 does not disqualify a borrower from an FHA loan, but requires manual underwriting.
- One year payout period has to be elapsed under the Chapter 13 bankruptcy.
- Borrower payment performance must be satisfactory.
- The borrower must receive written permission from the court.
- Debt-to-income ratios, income, and cash reserves depend on the Automated Underwriting System (AUS).
- A manual underwrite requires compensating factors with higher debt-income ratios.
- Requirements can vary by mortgage company if they do not go by the FHA Handbook,the Automated Underwriting System (AUS) findings,and have internal guideline on top of FHA guidelines.
How FHA Home Loan Rates Work
FHA home loan rates can vary depending on the lender. Some mortgage companies make pricing more favorable for a certain loan size, credit score, and other factors. For all loan types, interest rates can vary depending on:
- Loan amount
- Appraised value
- Occupancy type
- Purpose of loan
- Property type
- Number of units
- Property state
- Credit score
- Some mortgage companies have minimum credit scores that are higher than others
- Loan terms
- And other factors
How To Apply for an FHA Loan
- A borrower should start by talking to a Mortgage Loan Originator to obtain information on documentation required in order for them to determine if they are eligible for a pre-approval letter.
- In order to properly pre-approve a borrower, a Mortgage Loan Originator should run the Automated Underwriting System (AUS) in order to determine if the loan is approved/eligible, requires manual underwriting, or a borrower needs to work on credit and capacity.