March 13, 2023
How do FHA loan requirements work? Do you know what you need to qualify for an FHA mortgage loan or FHA refinance loan?
There are important details about FHA mortgage loans that can help you make an informed decision about applying for one. We’ll examine them below.
FHA Loans: Lower Down Payment Requirements
FHA loan down payment rules say you’ll need a minimum 3.5% down based on the appraised value of the home. You won’t be able to get a zero-down payment FHA mortgage unless you are a qualified borrower applying for an FHA 203(h) mortgage for disaster victims in a federally-declared disaster area.
3.5% down is the minimum cash investment required. Some borrowers with low FICO scores may be required to put down 10% depending on their scores, lender standards, and other factors. Not sure what FICO scores qualify for an FHA mortgage? Keep reading.
FHA Loan FICO Score Requirements For New Purchase Mortgage Loans
If you want to buy a home using an FHA mortgage, FHA loan rules in HUD 4000.1 state you must have a minimum FICO score of 500 to qualify with a 10% down payment, and a FICO score of 580 or better to qualify for maximum financing with 3.5% down.
Those are the FHA’s minimum credit score requirements. Your lender’s standards may be higher than FHA minimums, so you must discuss your FICO scores with a loan officer to determine what may be permitted.
FHA Mortgage Loans Are For Real Property
Any home purchased with an FHA loan must be considered “real property” with a permanent foundation.
That means that houseboats and any other vehicle cannot be purchased with an FHA mortgage-there is no way to classify such vehicles as real estate, even if the vehicle functions as some kind of temporary residence.
The foundation is the key issue in such circumstances, and it’s why a mobile home can be purchased with an FHA mortgage but a recreational vehicle cannot.
FHA Mortgage Loans Are Approved For Owner/Occupiers
In order to qualify for an FHA single-family home loan, you must agree (as a condition of loan approval) that you will use the home as your primary residence.
How Do FHA Loan Requirements Work?
FHA loan requirements set the minimum standards for loans to be approved under the FHA loan program. But the FHA minimums may be supplemented by other requirements, including lender standards, local laws/code/ordinances, and state/federal law.
FHA loan rules, especially where appraisals are concerned, don’t cover each and every situation possible.
Instead, many times the FHA loan rule book will defer to the local authority as long as the other aspects of the loan are still within FHA loan standards.
This is true of well inspections, credit score issues, zoning, and other concerns. Just because FHA loan rules do not specifically address a concern does not mean that issue hasn’t been addressed via state or local laws, lender standards, etc.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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