October 16, 2017
What do I need to know about applying for an FHA loan? There are a variety of things you should know before you fill out FHA mortgage loan application paperwork.
FHA Loan Residency Requirements
You do not have to be a United States citizen to apply for an FHA mortgage loan. The only requirement is that the applicant must be in the U.S. legally and have documentation to prove it.
Resident aliens and non-resident alien loan applicants will be required to document their status but would not be turned down for an FHA mortgage loan on the basis of not being a citizen.
FHA Loan Credit Requirements
For maximum financing, FHA loan rules say FICO scores of 580 or better are required. However, lender standards may be higher-check with your chosen financial institution to see what FICO score minimums apply there.
FHA On-Time Payment Requirements
Borrowers should plan to come to the FHA loan application process with no less than 12 months of on-time payments for all financial obligations including rent/mortgage payments.
FHA New Purchase Loans and Mortgage Insurance Premiums
Most FHA mortgage loans today will require an Up Front Mortgage Insurance Premium (UFMIP) and an annual mortgage insurance premium split over 12 months. The monthly payment is considered part of your monthly mortgage obligation. Certain UFMIP exceptions are made for purchases on tribal lands or Hawaiian homelands.
Mortgage Loan Amounts
FHA forward mortgages used to purchase a home can be made only for the amount of the mortgage plus any approved items included in the loan amount such as UFMIP, certain closing costs, etc.
Do not expect cash back at closing time unless you are given a refund for something you paid for up front and later decided to finance into the loan amount. It is not possible to apply for “more” loan and get cash back at closing as though you were getting a personal loan.
Down Payment Required
The minimum down payment is 3.5% of the adjusted value of the home. Some borrowers may be required to make higher down payments because of credit issues; ask your lender what credit score ranges may require this.
There is no such thing as a “zero downpayment” FHA new purchase loan with an exception made for certain FHA loans intended to assist victims of a natural disaster in a federally declared disaster area.
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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