FHA Mortgage

An FHA mortgage offers underwriting flexibility to those with less-than-perfect credit and/or a low down payment. It’s great for purchases, refinances and renovations.

What Is An FHA Mortgage?

An FHA mortgage is a residential home loan that has three key components: first, it is backed by the Federal Housing Administration (FHA); second, it requires borrower-paid upfront and monthly mortgage insurance; and third, the program has flexible underwriting guidelines. It’s designed to help homeowners and homebuyers who may not qualify for other loan programs obtain the financing.

Family that bought a home with an FHA mortgage

FHA Mortgage Benefits

FHA mortgages benefit individuals with less-than-perfect credit and/or a low down payment who are looking to purchase a home or refinance an existing mortgage. Here are the four core benefits of an FHA loan.

Easy Qualification: Under the FHA mortgage program, loan applicants find it easier to qualify. Low credit score? No problem.

Low Rates: FHA mortgage loans have some of the lowest mortgage rates in the industry, even for those with less-than-perfect credit.

Low Down Payment: You don’t need a big down payment to qualify for an FHA mortgage. You can also use gift funds if needed.

Appraisal Waiver: Some loan applicants qualify for an appraisal waiver. This saves you time and money.

Get The Right FHA Mortgage

We aim to provide the right FHA mortgage tailored to your short-term and long-term financial goals. And we’ll deliver it in the least amount of time. An FHA mortgage offers flexibility and multiple options for those with less-than-perfect credit and/or a low down payment.

Did you know Congress created the FHA program in 1934, during a time when the real estate industry struggled to survive? Millions of workers had lost their jobs, making it difficult to obtain a home loan. At the time, most mortgage loans were limited to 50% of the home’s value. Also, FHA does not lend money directly to consumers.

California Mortgage Finder

We’re the ideal partner for your next FHA mortgage transaction.

Get Started

FHA Mortgage Loan Requirements

To qualify for an FHA mortgage loan, you have to meet specific requirements. Here are the six requirements for the FHA mortgage loan program.

Credit

Technically there is no minimum credit score required for an FHA mortgage. However most most lenders require a 600 credit score and a few will go dow to a 580 credit score. The great thing about FHA is that if you have a 680 score or a 740 score, your rate is the same.

Income

Ideally, you’ll want a Debt-To-Income ratio at or below 43% to meet the FHA mortgag programs income requirements. Underwriting can increase to a 50% Debt-To-Income (DTI) ratio in some circumstances, and very few instances you might be able to go above 50% DTI ratio.

Equity

You’ll need at least 3.5% down for a purchase, and in some cases you don’t need a down payment (if you qualify for a Down Payement Assistance program). If it’s a rate and term refinance, you’ll need at least 3.5% equity in the property. If you are doing a cash-out refinance, you must have at least 20% equity post-closing.

Appraisal

If you are doing a purchase or a regular refinance, then FHA will require you to do a real estate appraisal. If you are doing an FHA Streamlined refinance, then you will not have to do an appraisal.

Asset

FHA usually does not have an asset requirement other than showing two months of statements for the account in which your down payment and closing costs come from.

Documentation

For most FHA programs the documentation requirement is to show two years of income documentation. The FHA streamline sefinance program does not have that requirement.

FHA Mortgage FAQs

Here are some common questions and answers loan applicants have about the FHA mortgage program.

I have a bankruptcy; can I still get an FHA mortgage?

Yes! If you filed a Chapter 13 bankruptcy, there is no waiting period after the bankruptcy has been settled. And if you are currently in the middle of a Chapter 13 bankruptcy, you may still be able to do an FHA mortgage if both the court and lender approve the loan.

If you previously filed for Chapter 7 bankruptcy, you’ll have to wait two years from the discharge date before obtaining an FHA loan in California. Not all mortgage lenders allow this; many have an overlay regarding bankruptcy.

How Long Does It Take To Get Approved?

Sometimes, you can get an underwritten approval within 24 hours of submitting all your documentation. Generally, though, it takes a bit longer, and it depends a lot on the number of files the underwriter has to review.

How Do I Qualify For The Streamlined Program?

The FHA Streamlined refinance program is one of the best mortgage programs in the industry. The first qualification is that you must have an FHA mortgage in good standing.

Is There a Pre-Payment Penalty?

There is no pre-payment penalty with the FHA mortgage program. You can refinance or payoff the mortgage at any time.

Are Gift Funds Allowed To Be Used For A Down Payment?

Yes, you can receive a gift from a relative, friend, or even your employer for your down payment. These funds must be documented, and the donor must sign the gift letter. The letter must clearly state that the funds donated are a gift and do not need to be paid back. This benefit allows you to purchase a home if you don’t have a down payment (or need a larger one).