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Basics Of An FHA Home Loan

May 23, 2017

Are you interested in an FHA mortgage? If you’ve never applied for an FHA home loan before, there are some basics you should know that will help you make the right choices for the property you wish to purchase.

Who Is An FHA Home Loan For?

The FHA single-family home loan program is available to all financially qualified borrowers looking to buy property that meets FHA standards. FHA loans are for owner-occupiers looking to purchase a home to live in as their primary residence. There is a residency requirement for FHA mortgages, and FHA single family home loans are not intended for investment properties.

You can purchase a home with as many as four units, and the borrower is free to rent out the unused units of the property as long as she or he occupies at least one of the units full-time.

FHA home loans cannot be used for vacation homes, time shares, or other “occasional occupancy” type of properties.

What Kind Of Home Can Be Purchase With An FHA Mortgage?

FHA loans can be used to buy 1-4 unit properties. Other eligible properties may include townhomes, condos, manufactured or modular homes, mixed-use property that meets FHA loan standards, and fixer-uppers. An FHA fixer-upper loan (known as an FHA 203(k) rehab loan) has different requirements and procedures than a typical home loan, but is definitely available to borrowers as an option.

Some types of home loans (manufactured home loans, for example) may not be offered by a participating lender. Be sure to ask your lender if the type of home loan you seek is available through that financial institution.

Are You Qualified For An FHA Mortgage?

There is a common misconception that FHA loans have a minimum income requirement, which is not true according to the FHA Loan Handbook, HUD 4000.1. What matters instead? Your FICO scores, debt-to-income ratio, and your repayment history.

There is also no maximum income cutoff. Borrowers cannot earn “too much” to qualify for an FHA mortgage. Some mistakenly believe that FHA home loans are for the economically disadvantaged. This is a misconception and no borrower will be turned away for income that is “too high for an FHA loan”.

Bruce Reichstein - FHA News Author

By Bruce Reichstein

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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