Most of us are unaware of what actually the FHA loan means. FHA stands for Federal Housing Administration. FHA loans are those loans which are insured by the Federal Housing Administration. FHA loans were introduced to make buying home easier for families. A number of lenders participate in FHA loans but the standard FHA requirements are the same, regardless of whosoever you use. Below are some of the major criteria which should be taken into reference before applying for an FHA loan.
These factors matter a lot in passing your home loan and could be one of the major reasons for the disqualification of an FHA loan-
1. Employment : To qualify for an FHA loan, you must have been employed for at least two successive years. Your employment needs to be verified before getting approved for an FHA loan.
2. Credit Score : The minimum credit score requirement for an FHA loan is 620. Bankruptcies, foreclosures, repossessions and late payments can negatively affect your credit score, hence, must be prevented.
3. Debt Ratio : For the successful approval of your FHA loan, your payment, interest, taxes and insurance must be no more than 29% of your monthly income.
4. Down-Payment : FHA never finances 100% of the house you purchase, however, it will finance 98.15% of the appraisal value of your house. You may have to put down 3.5% of the appraised value of the house for yourself.
5. Property Appraisal- The FHA lender will have a formal inspection of the house, which evaluates the value of the house that the lender may be able to recover in the event that you fail on the mortgage loan.