July 2, 2024
It’s likely the most commonly asked question about FHA loans. “How do I get approved for an FHA mortgage?”
The answer starts with some numbers, but there are other important factors to remember. It’s not all about FICO scores, though they play a significant part in the lender’s decision to approve or deny a loan.
FHA Loan FICO Score Requirements For Home Loan Approval
If your FICO scores fall between 500 and 579, FHA loan rules say you must pay 10% down, assuming lender standards allow loan approval for those scores.
Applicants with FICO scores of 580 or higher are required to make a 3.5% down payment. However, FICO scores aren’t the only factor that influences loan approval.
Stable Income Rules
If you are a typical college graduate, depending on how much employment history you already have, this may be good news for you.
FHA loan rules typically require the lender to verify two years of employment for all borrowers. For some loan applicants, that’s bad news.
Are you an applicant working in a skilled profession? The FHA 24-month standard could be more flexible depending on the career.
Much depends on the nature of your training, the job itself, and other variables. The lender needs to know the employment you have when you apply for the loan will continue into the early years of the mortgage.
Suppose you graduated recently but have experience in the job market already. In that case, finding a lender willing to consider your application may be possible, at least compared to those who graduated with little or no employment experience along the way.
New Careers, Non-Traditional Employment
Have you switched careers? Did you become a freelance, contractor, or non-traditional employee? If so, the FHA 24-month standard may apply.
If you have started your new career path in the last 12 months, it may be good to wait a bit longer before applying for a mortgage loan. The best advice? Work 24 months before applying if you are a recent freelancer, contractor, or have become an entrepreneur.
Are you a seasonal worker? You may have different requirements in this area than a loan applicant working all year round. If this applies to you, check with your lender about the rules that may apply in your case before you begin.
FICO Scores Aren’t The Only Data Your Lender Sees
Do you have late or missed payments on your credit reports?
Your participating FHA lender is looking for evidence you are a good candidate for the home loan but having late or missed payments in the 12 months leading up to your loan application can derail that process.
Late payments on your credit report raise a red flag for the lender. And that worsens if late or missed payments are for housing-related expenses.
A borrower’s credit report should help the lender justify approving the loan, but if there are indications that you can’t make payments on time in your credit report, that gets much harder for the loan officer to do. Think like a lender, and you get much closer to home loan approval.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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