Your FHA Loan Checklist: What Lenders Are Looking For
If you're exploring homeownership and wondering whether an FHA loan might be a good fit, you're not alone. FHA loans are a popular option for first-time buyers, those with limited savings, or individuals with lower credit scores. As a mortgage loan officer, I often walk clients through the eligibility requirements to help them feel confident and prepared. Here's a straightforward checklist to help you assess whether you may qualify.
FHA Loan Eligibility Checklist
Credit Score and Down Payment
A credit score of 580 or higher typically qualifies for a 3.5% down payment.
Scores between 540 and 579 may still be eligible, but a 10% down payment is usually required, along with possible additional conditions.
Down payment funds can come from personal savings, a gift, or a down payment assistance program.
Employment History
Lenders generally look for two years of consistent employment.
stable income and job history help demonstrate reliability. If you're in the middle of a job change, it may be worth waiting until after your loan is approved.
Residency and Age
You must be a U.S. citizen or lawful resident.
You must be at least 18 years old.
Social Security Number
A valid Social Security number is required to verify your identity and process your application.
Debt-to-Income Ratio (DTI)
A DTI of 43% or less is recommended.
Some lenders may allow up to 50% if you have strong compensating factors, such as a higher credit score or additional savings.
Primary Residence Requirement
FHA loans are intended for primary residences only.
You must plan to occupy the home within 60 days of closing.
Property Standards
The home must be in livable condition and meet FHA safety standards.
An FHA-approved appraisal is required.
Mortgage Insurance Premium (MIP)
FHA loans require both upfront and monthly mortgage insurance premiums.
These premiums typically remain for the life of the loan unless you refinance.
Bankruptcy or Foreclosure History
Chapter 7 bankruptcies must have been discharged at least two years ago.
Foreclosures must be at least three years old.
In some cases, extenuating circumstances may allow for shorter waiting periods.
FHA vs. Conventional Loans: Key Differences
Minimum Credit Score
FHA loans typically require a minimum score of 580 (or as low as 540 with a 10% down payment).
Conventional loans usually require a score of 620 or higher.
Down Payment Requirements
FHA loans allow for as little as 3.5% down.
Conventional loans may offer down payments as low as 3%, depending on the borrower’s profile.
Mortgage Insurance
FHA loans require mortgage insurance for the life of the loan.
Conventional loans require mortgage insurance only if the down payment is less than 20%, and it can be removed later.
Flexibility in Qualification
FHA loans are generally more lenient when it comes to credit history and income.
Conventional loans tend to have stricter qualification standards.
Final Thoughts
FHA loans can be a great path to homeownership, especially if you're just starting out or working with limited resources. If you meet most of the criteria above, you may be well-positioned to move forward. I always recommend speaking with a lender who specializes in FHA loans to review your full financial picture and help you get pre-approved.
This information is for educational purposes only. Loan programs, rates, and guidelines are subject to change. All loans are subject to underwriter approval. Consult a tax advisor or accountant for guidance on tax-related eligibility.