FHA home loans explained for first-time buyers
Chapter 1: is FHA a fit?
The friendly answer
FHA tends to fit buyers who have modest savings, a thinner or bruised credit history, or a higher debt load than conventional programs like, and who will live in the home. HUD sets minimum credit and down payment tiers, waiting periods after events like bankruptcy, and occupancy rules; lenders can add stricter requirements of their own.
Last reviewed against the primary sources listed below.
The main qualification areas
- Credit history and score, with tiers set by HUD.
- Steady, documented income.
- Debt compared with income.
- The home must be your main residence.
- The property must meet FHA standards and appraise.
What can rule FHA out
- Buying an investment property or second home.
- Recent foreclosure, bankruptcy or short sale still inside a waiting period.
- Delinquent federal debt, such as defaulted student loans, until resolved.
- A home that cannot meet the property standards.
Lender overlays
HUD's rules are a floor. Individual lenders may require higher scores or more documentation, so one lender's no is not always FHA's no. The CFPB's FHA page explains the basics.
First-time buyers often ask
Is it hard to qualify for FHA?
FHA's standards are generally more flexible than many conventional programs on credit and debt, but you still need steady income, an acceptable credit history and a home that meets FHA standards.
What disqualifies you from an FHA loan?
Common reasons include not living in the home, a recent bankruptcy or foreclosure inside HUD's waiting period, delinquent federal debt and a property that fails FHA standards.
What's the downside of an FHA loan?
Mortgage insurance premiums, both upfront and annual, which can last for a long time, plus property standards that some fixer-uppers cannot meet.