FHA Loan Requirements in 2022

Guidelines on home loans change every year. Knowing what the FHA loan requirements are, is the first step toward getting the home of your dreams. 

An FHA loan isn’t always the best option, but it is perfect for first time home buyers who may have credit blemishes or don’t have a 20% down payment to make on the house.

1. FHA Credit score can be as low as 580, sometimes even lower.

Each lender has different credit requirements. Some may have a minimum credit requirement of 680, while others will go as low as 500.

It will be tough to find a lender who will go down to a 500; but they are out there.

Coole Home: We currently have a minimum requirement of 620. Lower score accepted on a case by case basis.

FHA loan program will allow financing down to a 500 credit score, which is not common!

For borrowers with scores between 500-579 down payment requirement is 10%, and scores with 580 and up are only required to make a 3.5% down payment.

2. FHA has no income limitation.

Some loan programs have a cap on how much income you can make. With FHA, there is no cap. You can make six figures a year and still qualify.

3. FHA does have limitations on loan amount.

Each county has a different limit and they change every year.

The below examples are based on year: 2022.

San Diego’s FHA loan limit is $879,750. Los Angeles is $970,800. 

For the state of Florida: Baker County has a limit of $432,400, Broward county has a limit of $460,000.

Texas FHA limit: Anderson County has a limit of $420,680, Bexar County has a limit of $449,650, Dallas FHA limit is $450,800.

As you can see, each county and state is different.

Talk to a loan officer to determine what your county limit is.

4. You don’t have to be a first time home buyer.

FHA loans and first time home buyer goes hand in hand. BUT you don’t need to be a first-time buyer to use the program.

5. Buy a mobile home and manufactured home with an FHA loan.

FHA allows financing for all kinds of properties. Mobile homes, manufactured homes, condos, townhomes, and even multi-unit properties like a duplex or 4plex.

FHA is only for primary residences, but you can live in one unit and rent out the others if you purchase a multi-unit. 

6. You can build a home. FHA construction loan.

The minimum credit score requirement is 620 for an FHA construction loan, and not all lenders offer this program. It also takes a long time to build a home and is not usually recommended when purchasing a home for the first time. It’s a stressful process.

Are you interested in building a home? Apply for a FHA Construction Loan.

7. You can buy a fixer-upper.

Yes, you can buy a property that needs a lot of repairs and get the cost of repairs financed into the loan. It’s called an FHA 203K. 

Keep in mind that the FHA program is only for primary residences. You can’t buy a home with the intention of flipping it to someone else once repairs are done. 

More info: FHA 90 day flip rule

8. FHA Mortgage insurance is for life.

FHA requires mortgage insurance to be paid. Whether you are making a 20% down payment or a 3.5% down payment, it’s required. The only way you can get rid of it is by refinancing out of the loan.

9. Refinance using an FHA streamline without income documentation or an appraisal.

When interest rates go down, you can refinance without having to pay for an appraisal or providing any income docs; as long as it’s a rate and term refinance (lowering monthly payment)

If you want to take some money out to pay for bills or home improvements, an appraisal and income verification is required.

Read more: FHA refinance info

10Homeowners and property taxes are taken care of.

FHA requires the monthly mortgage payment to include property taxes and homeowners insurance. When the bill is due each year, the lender will pay for it, so you don’t have to worry! 

When property taxes are due, it can be quite a large bill. For example, in San Diego, property taxes are estimated at 1.25% a year. If you purchase a home for $600,000, that is $7500 that you would have to come up with every year! 

It’s much more manageable when paid every month. You don’t want the county repossessing your home because of unpaid taxes.

11. FHA interest rates are lower.

Rates are typically lower on an FHA loan than a Conventional loan because it is a government loan program, and the government offers incentives to lenders for making the program available to their clients.

12. Had a bankruptcy? No problem.

Having a bankruptcy on your credit record isn’t doomsday. You can get a home loan after a bankruptcy. You must have reestablished credit after the bankruptcy (no late payments, collections, repossessions). Chapter 7 requires a waiting period of 2 years from the discharge date and Chapter 13 requires 12 months of on time trustee payments to be made to qualify.

13. FHA is easy to qualify for after a foreclosure.

You can purchase a home again after a foreclosure. Just like the bankruptcy requirements you must have re-established credit (no late payments, collections or reposessions) after the foreclosure.

There is a waiting period of 3 years from when the home was sold. You can learn more about this by reading the following article >> Buying a house after foreclosure

Read more: FHA vs. Conventional

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