FHA Home Loans

An FHA loan is a mortgage loan with flexible guidelines backed by the Federal Housing Administration ( A Department of HUD). FHA loans are extremely popular with first time home buyers because they allow down payments as low as 3.5% and allow the seller to pay the borrowers closing costs. FHA has flexible credit requirements. FHA borrowers sometimes have credit scores as low as 580.

Nearly 20% of all mortgages in the United States are FHA loans.  A credit-challenged borrower is more likely to choose FHA because of the fair treatment of borrowers. The mortgage rate offered to lower credit score borrowers is typically much higher than market mortgage rates but with FHA, the mortgage rate offered only increases slightly for challenged credit. If you want to be sure you are not taken advantage of by a mortgage lender, FHA may be a great option. The loan program for first time home buyers has regulations built into the guidelines to make sure no home buyer is taken advantage of.

Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development (HUD) in 1965. When FHA was created, the housing industry was not doing well. Two million construction workers had lost their jobs, terms were difficult for home loan applicants, borrowers were required to put 50% down, and only one in ten Americans owned their homes. During the 1940s, FHA programs helped finance military housing and homes for returning veterans and their families after the was. With the help of FHA, by 2001, the nation’s home-ownership rate had soared to an all-time high of 68.1 percent

Benefits of FHA Home Loans


FHA Loans have flexible underwriting guidelines which include lower time needed since a derogatory mark on the credit report.  And the best part, this does not mean a first time home buyer will pay a high-interest rate. FHA offers some of the best available mortgage interest rates.

An FHA loan only requires 3.5% down and the seller is allowed to pay your closing costs with seller concessions. In addition to the low down payment FHA also helps ensure the property you are buying is a quality home. We would like to think all sellers are honest and aware of all the issues with the home they are selling but this is not always the case. With FHA, a property appraisal is required in addition to a water and septic inspection for private systems. The inspection and appraisal completed help provide more detailed information to the home buyer to make sure you are not walking into a money pit. After closing, FHA does not warrant the condition of the property but you put yourself in a better position trying to learn as much about the property before closing on the sale.

What Credit Score Do I Need to Qualify For a FHA Loan

Most lenders require a minimum credit score of 580 to qualify for an FHA loan. Although there are no minimums, most lenders have an overlay requiring a minimum credit score of 580.

Read more about FHA credit score requirements

How Do I Apply For an FHA Loan?


The first step in applying for an FHA loan is gathering your financial documents to provide to your mortgage lender. If you are an employee with only one income, this should be a simple task. You would Need….

  • W2 Forms From the Past 2 Years
  • One Month of Pay Stubs
  • A Copy of Your Drivers License
  • One Month Bank Statement (All Pages)
  • Last Years Complete Tax Return

If you are self-employed, receiving benefits, or in another less common situation, you may need to provide some of the following documents.

  • Social Security, Disability, or Pension Award Letters
  • More Bank Statements to Show Deposits
  • 2 Years of Business Tax Returns
  • Child Support Order, Separation Agreement, or Divorce Decree
  • Bankruptcy Discharge Paperwork

This is not the complete list as the mortgage consultant may ask for additional documents but this is a great way to start. The next step in the process is to submit your application through our portal. Some of the questions you may not know the answer to but do the best you can. Ultimately, this portal is used to gather your personal information securely so we can start the credit consultation process.  Don’t Worry! If you make a mistake or enter incorrect information, we will be in touch to confirm the information.  If you would like to learn more about documents needed to obtain an FHA loan, click here.


No Worries. We understand. All of this information on FHA Loans is a lot to take in. If you want to schedule an appointment to discuss this further just schedule a consultation online. We love making our clients easier with technology! To request a list of approved FHA lenders in your area please give us a call at (518) 324-5544.