How to Determine Your Lending Eligibility for an FHA Loan

by Tricia Cyr 11/10/2019

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

Tricia Cyr

Tricia Cyr is the owner /broker of CYR Real Estate, a Connecticut real estate company that has been in business for 27 years. After working for a small real estate firm located in Branford, she decided to start her own real estate company. Not only has she been actively selling real estate on the Connecticut shoreline for over 27 years, but she is also a lifetime resident of the shoreline. "I am a full-time real estate broker who knows what it takes to get the job done, allowing you to have complete confidence that you will be well represented. I give personal attention, always keeping myself accessible. I return my phone calls promptly.”

Tricia is energetic, efficient, honest, dependable and always working with your best interest in mind. Offering the highest quality of service and will make your real estate experience a pleasant one. Cyr Real Estate has been generating repeat clients and personal referrals for 27 years. We use all the latest technology & tools to successfully market all our properties. If you are interested in buying or selling a home, or if you need help with property management, please consider Cyr Real Estate 203-481-6638 New Haven Middlesex Association of Realtors | Connecticut Association of Realtors National Association of Realtors | Shoreline Chamber of Commerce.