fha loan guide

FHA Loan Guide

Loan Type: FHA Home Loan

Specific Uses: First Time Home Buyers, Refinance, Small down payment, Debt Consolidation, Cash Out.


What is an FHA Mortgage?

An FHA Mortgage is a Federal Housing Authority mortgage home loan. It is a loan that is insured by the government to the bank or lender in case of a default by the Homeowner(s). This is a great loan option for first time home buyers, refinancing, cash out refinances, minimum down payment ability, blemished credit scores, debt consolidation and lower income households. FHA loans only require a 3.5% down payment on a purchase. FHA Home Loans can also possess the ability to have streamlined refinancing in the future if you decide to ever refinance. These are not the only reasons why FHA loans are appealing, in some cases they may be assumable as well.


FHA Home Loan Summary:

An FHA Home Loan is an Assumable Mortgage which means that the mortgage may be taken over by another borrower. The borrower that is taking responsibility must still qualify for the mortgage per guidelines set by FHA and the specific bank or lender. FHA Loans may be Adjustable or Fixed Rate mortgages.

An FHA Home Loan provides a way to do cash out on a refinance as well. This means that you are taking the equity out of the property and receiving the equity in a form of lump sum cash.

Beware that on an FHA Home Loan, the interest rate might be lower but there is Private Mortgage Insurance added into the monthly mortgage payment. An FHA Home Loan also will charge Upfront Mortgage Insurance of a rate of 1.75% and .85% annually.


FHA Home Loan Guidelines:

  • DTI: (Debt-to-Income) Ratio cannot exceed 56%
  • Max Loan Amount: This depends on the county and its Loan Limits. Usually $417,000.
  • Income: 2 Years full tax returns required
  • Min Credit Score: 620 (depending on Lender)
  • Max CLTV: (Combined Loan-to-Value) on an FHA Home Loan is 97.75%
  • Max LTV: on a Cash Out Refinance is 85%
  • Collections: Any Collection balances over $2,000 must be collected or have made payment arrangements prior to closing.
  • Cash Out Max: The maximum amount of money back for a cash out refinance with FHA is $200,000.00
  • Down Payment:5% Down Payment required on FHA Home Purchase loans
  • Missed a Payment? Only two 30 Day Mortgage Late Payments allowed in the last 12 months.



FHA Home Loan Facts:

  • FHA Adjustable Rate Mortgages have a cap of 1-1-5.
  • FHA Home Loans are not only just for First Time Home Buyers.
  • May only have one FHA Home Loan at a time.
  • If you are located in a Community Property State, the lender is required to pull credit on a spouse that is not on the mortgage.
  • When the Lender is verifying Assets, they will need to document source of funds of large deposits over 1% of the Loan amount.
  • Debt-to-Income Ratio’s on an FHA mortgage are usually higher (better) for borrowers with income qualifying issues.
  • Upfront Mortgage Insurance Premium = 1.75% of Loan amount (depending on when FHA Loan was obtained)
  • Annual Mortgage Insurance Premium = .85% (depending on when FHA Loan was obtained)
  • Minimum FICO (Credit Score) Required = 620. Sometimes lower depending on the Lender.


There is still much more information about FHA Home loans provided by the Federal Housing Authority. Reach out to your bank or lender for more specifics on what you can qualify for.

As we like to say here at HC:   Ask.  Learn.  Save.

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