How to Get Approved for an FHA Loan

Posted on Dec 10 2021 - 2:16pm by Housecall

By Lizzie Weakley

For many years, the Federal Housing Administration was regarded as a destination for borrowers with low to zero credit scores. However, the same cannot be said about the department today. The FHA is now a go-to-place for moderate-to-low income workers with good credit histories. A home is a long-term investment, however, when purchasing a home, you may be unable to provide up-front cash for the house. In this case, an individual needs to get a mortgage loan to boost their home purchasing finances.

Related: Know How and When to Apply for Home Loans in 2021

With a low credit score, you may not be eligible to apply for a loan in a conventional financial institution. However, you may still qualify for an FHA loan. To ensure that you're eligible for a federal housing loan, review the tips below:

Credit Score

If you don't have a credit score, you do not qualify for FHA loans. Your credit score needs to be at least 580 for eligibility purposes. When your credit score is at least 580, your down payment can be reduced to 3.5%. However, due to the pandemic, most FHA loan lenders revised their credit scores and adjusted them to a higher number. Therefore, it would be wise to increase your credit score to their minimum requirement before you think of applying for the FHA loans.

Down Payment Funds

Your down payment depends on your current credit score. As noted above, if your credit score is within the required minimum, you only have to cough up 3.5%. However, having a lower credit score shows that you are a more risky investment and you'll likely be given an FHA loan at a high down payment of 10%. You don't have to rely on your savings to make the down payments solely though. You can also receive gift money, in which your donor provides an official letter and contact information to back up the loan.

Debt-to-Income Ratio

Your gross income should be enough to cover your initial investment, including the FHA loan, without surpassing a 50% mark. You need to ensure that your payments, including your taxes, car and student loans, insurance, and other costs, total at most 43% of gross income.

Mortgage Insurance

When applying for an FHA loan, you're expected to pay an upfront mortgage premium (approximately 1.5% of the loan). However, when the mortgage payment falls below 78% of your home's value, and you have been consistent in the payment for at least five years, the premium will be lifted. Also, you'll need to pay an annual mortgage premium.

FHA loans are especially common among first-time homebuyers. These loans offer homeowners a great way to finance their homes and get the stability they need!

Lizzie Weakley is a freelance writer from Columbus, Ohio. In her free time, she enjoys the outdoors and walks in the park with her husky, Snowball. For more information about FHA loans, Weakley recommends contacting Gapital.


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