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FHA Loan Credit Score Requirements for 2018

Have you heard the advertisements for FHA home loan programs recently announced for first time house buyers? 2018 is looking like a fantastic time to get FHA financing. Rates are low, property values are rising, and the qualification criteria are quite easy. If you are thinking about buying a house with a FHA mortgage this year, here's the low down on current, 2018 requirements. There is a lot of talk in the industry of the Department of Housing and Urban Development making many positive changes by easing qualifying standards and even lower the minimum FHA credit score for several buying and refinancing products in the new year.

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Minimum Down Payment 3.5%

One of the biggest attractions of an FHA loan is still the low-down payment. If you bought a home at the height of the last boom, you know that 100% financing was commonplace back then even for people with mediocre credit.

That is no longer the case. The 3.5% down FHA home loan is practically the best game in town, unless you qualify for a VA loan. That product still offers a zero-down mortgage loan. But for the rest of us who are not involved with the military, the Federal Housing Administration still offers the lowest FHA down payment.

To qualify for such a low-down payment, you need to have a minimum FICO of 580. That is a pretty bad credit score, honestly, and your odds of approval for a low-down payment will improve markedly if you have a credit score of at least 640.

If your score is under 580, you definitely need to put down 10%.

Low Income Requirements

Another benefit of the FHA-guaranteed loan program is that there is no minimum or maximum salary requirement. Just about anyone at any income level can be approved for an FHA loan, as long as you can document the income to pay the mortgage and your other debts. You do need to have at least two credit accounts. A credit card account and a car loan will do the job.

You also may not have any late federal tax debt or a judgment or any kind. However, if you have a payment plan with the IRS and pay on time, you are good to go.

Flexible Debt to Income Standards

The debt to income requirements for an FHA loan is reasonable and flexible. Your mortgage, credit cards, car payments and student loans can be up to 50% or less.

FHA Loan Limits

FHA has maximum amounts set on loans that it will insure. This varies based upon geographic region. For the lowest cost areas of the country, the maximum loan is $275,665 for single family homes. For high cost areas, the 2017 maximum amount is $636,150. Many moderate cost areas of the country have a maximum loan of $424,100.

It is important to know what the maximum FHA-insurable loan is for your part of the country. If you are looking at a home above that amount, you will not be able to get an FHA loan.

Find out what the FHA limits are in your region.

Property Requirements with FHA Home Loans

There are certain requirements for properties to qualify for FHA loan programs:

  • No investment properties, unless you reside there (such as in a duplex or triplex).
  • No property flips allowed. This means you cannot buy the home within 90 days of a previous sale.
  • You have to take title in your name or in the name of a living trust.
  • The loan has to be for your principal resident. One borrower has to live in the home within two months of closing.
  • All FHA insured properties must be inspected and appraised. Older homes in need of repair are eligible but certain standards do apply or FHA will not insure it.

FHA Documentation

To qualify for a FHA loan in 2018, you have to show a valid social security number. You also have to provide proof of income, including paystubs, tax returns and/or W-2s.

If you are self-employed, getting an FHA loan is not difficult. You do need to show at least a year of tax returns showing adequate income to pay the loan, and possibly two years. Also, you will need to provide a profit and loss statement for the current year to date.

Low Credit Scores Ok

How low? You can have a credit score of 500 and still qualify. But for best results, shoot for a 640 or higher. That score will give you more choice of lenders. Apply for an FHA mortgage today with no fees to determine eligibility.

Bankruptcy and Foreclosure Doesn't Disqualify You

Many people think that if they had a bankruptcy or a foreclosure in the recent past that they cannot get a home loan. Worse, some still believe that it is impossible to get a home loan if you have had a bankruptcy in the last seven or even 10 years! This is simply not true.

Where the confusion may occur is the fact that a bankruptcy and foreclosure can stick around on your credit report at least seven years, and possibly 10 years. This by no means implies that you cannot get a new home loan when those negative marks are on your credit report.

In fact, some FHA borrowers may be able to get a loan within one year of a foreclosure or bankruptcy. Others may need to wait two years.

The critical factor in getting approved is showing that your income and credit have recovered from your previous financial difficulties. If you can show you have good income and have credit accounts you are paying on time on, you can likely get a loan.

The Bottom Line for Home Loans Insured by FHA

FHA loans are very popular in America today, with at least 25% of new loans being FHA loans. This is logical. Government mortgage loans insured by the Federal Housing Administration have low down payments, are easy to qualify for, have flexible credit standards, and low rates. You should talk to your lender soon to see what kind of rate and mortgage loan that he can get you with FHA products.

         
 

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