FHA Loan Requirements
Credit scores and down payments are just two requirements needed for an FHA loan. Listed below are requirements set forth by the Federal Housing Authority.
Borrowers must have a stable employment history or have worked for the same employer for 2 consecutive years.
Borrowers must have proof of a valid Social Security number.Click to see valid forms of identification.
Lenders may accept:
- Social Security Card
- An identification card issued by Federal, state or local agency
- An identification card issued by an employer or trade union
- Earnings statement or payroll stubs
- IRS (Internal Revenue Service) Form 1099
- Unemployment benefit letter
- Retirement benefit letter
- Life insurance policies
- Other documents that the lender determines adequate evidence of a valid SSN
Refinance up to 97.5% of your primary home’s value.
If purchasing, borrowers must pay a minimum down payment of 3.5%. Money can be gifted by a family member.
New FHA loans are only available for primary residence occupancy.
A property appraisal from an FHA approved appraiser must be completed.
Property must meet the minimum standards for an FHA loan. If your home does not meet the established, you may be required to complete repairs before closing.
Borrowers must be two years out of bankruptcy and have re-established good credit. If there are extenuating circumstances that caused your bankruptcy and you are out for more than one year, exceptions can be made.
Borrowers must be three years out of foreclosure and have re-established good credit. Exception can be made for extenuating circumstances.
FHA Loan Mortgage Insurance
Since an FHA loan is government-backed, it requires two kinds of mortgage insurance premiums: one paid in full upfront, or financed into the mortgage, and the other is a monthly payment.
Upfront mortgage insurance premium (UFMIP)
A premium of 1.75% of the home loan is a one-time upfront monthly premium payment made by the borrower regardless of credit score. This sum can be paid upfront at closing as a part of settlement charges or rolled into the mortgage. For example: $300,000 loan x 1.75% = $5,250.
Annual MIP (charged monthly)
This monthly charge is figured into your mortgage payment. The mortgage insurance premium is a percentage of the loan amount, based on the borrower’s loan-to-value (LTV), ratio, loan sized, and length of loan. The typical MIP cost is usually .85% of the loan amount but may vary depending on your loan. Following the example above, the borrower would have to make annual MIP payments of 0.85% x $300,000 = $2,550 or $212.50 monthly. This is to be paid in addition to the UFMIP cost.