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Federal Housing Administration (FHA) Loans

This loan program provides federal assistance so more Americans can become homeowners. FHA loans only require a 3.5% down payment (versus a standard 5% minimum requirement) and do not require the purchase of separate private mortgage insurance (PMI).

Since FHA loans are easier to qualify for, they are perfect for first time home buyers who typically need more assistance to purchase a home.

Summary

Easier to qualify than a conventional loan
Available in fixed rate or ARM
Lower down payment
Pre-qualification available
Quick decisions, and local service
Mortgage insurance is built in, does not require additional PMI purchase

Qualifications

FHA loans make a home mortgage available even if credit scores and income fall below the traditional measures for a home mortgage. Some of the basic qualifications are:

Two years of steady employment
Credit score of 620 or higher
Any bankruptcy must be at least two years old
Any foreclosure must be at least three years old
Total monthly debt obligations (including your mortgage payment) should not exceed 45% of your gross monthly income.

Additionally there are lending limits associated with FHA loans. These vary by county. To see the maximum home value for which you can apply for an FHA loan, click here.