How to Determine Your Lending Eligibility for an FHA Loan

by Natalie Rakoci 12/01/2019

FHA loans have long been a valuable resource for Americans who want to fulfill their goal of homeownership but who don’t have the benefit of a lengthy credit history and equity.

If you’re hoping to buy a home in the near future but want to explore all of your options in terms of financing, this article is for you.

Today we’re going to talk about FHA loans and how to know if you qualify for one.

What are FHA loans?

FHA loans are issued by private mortgage lenders across the country, just like regular mortgages. The difference, however, is that an FHA loan is “guaranteed” by the federal government.

Lenders decide your borrowing eligibility, and how much you can borrow, by determining risk. If you don’t have a sizable down payment (oftentimes 20% or more) and you have a low credit score, most mortgage lenders will see you as a risky person to lend to.

When you get an FHA loan, however, the federal government assumes some of that risk, allowing you to secure the loan anyway.

This means you can buy a home with a low credit score, a smaller than usual down payment, and save on some closing costs.

How do I qualify for an FHA Loan?

To find out if you qualify for an FHA loan, you’ll head to the same place as a traditional mortgage--a mortgage lender. Oftentimes, you can simply call or visit the website of lenders to get the process started.

As with all things, it’s a good idea to shop around for a mortgage lender. Their offerings will be largely similar, but there might be minor differences that make one better than another for your particular circumstances.

Down payment requirements

To secure an FHA loan, you will need to make a down payment of at least 3.5%. However, this low down payment comes with a price. You’ll typically be required to pay private mortgage insurance (PMI) fees on top of your accruing interest for your loan.

Credit score requirements

While you can often secure a mortgage with a lower credit score through an FHA loan, there are still some requirements. To secure a loan with the lowest possible down payment (3.5%), you’ll need a credit score of 580 or above.

Previous homeowners and FHA loans

A common misconception about FHA loans is that they are only for first-time homeowners. However, you can still qualify for an FHA loan if you’ve owned a home before as long as it has been three years since you’ve had a foreclosure or two years since filing for bankruptcy.

If you meet these three conditions, you should be able to secure an FHA loan through a traditional mortgage lender.

About the Author
Author

Natalie Rakoci

It is more important than ever to have a real estate professional by your side who understands the unique, vibrant communities within the local real estate market. One who proudly works with only the highest ethical and legal standards, while having an optimistic and enthusiastic nature you will appreciate. Prior to becoming a licensed Realtor, Natalie was a Clinical Administrator for the largest healthcare system in Western PA. During nearly two decades of experience in clinical, business development and Administration in healthcare, she learned invaluable lessons about the daily operations of a business that is truly all about people. There are many people involved in a real estate purchase or sale and treating each with the utmost respect, exceptional communication and the highest ethical practice is Natalie’s highest priority.

Natalie first fell in love with the Grand Strand at ten years old during frequent family beach vacations. She moved to the Myrtle Beach area in 2012, and immediately began her full-time career as a real estate professional. Natalie ensures she is well equipped to serve the needs of her clients by consistently attending educational and leadership training, networking events, obtaining various certifications and enjoys serving the surrounding communities.

Natalie’s number one goal is customer satisfaction and she looks forward to the opportunity to earn your business. She understands that buying or selling a home can be a time consuming and emotional experience; her goal is to provide a positive, easy, and seamless process for each of her clients.