What Do I Need to Qualify for an FHA Loan?

Mortgage loans insured by the Federal Housing Administration are available to home buyers who meet the criteria for this type of loan. Every mortgage has basic requirements. But FHA mortgage loans are flexible and buyers can qualify with lower credit scores and past credit mistakes.

Credit Score of 620

Apply for a conventional loan with a non-FHA mortgage lender and you may not get it if your credit score is in the low 600 range. Mortgage lenders typically require credit scores around 680 or higher. This is because buyers with this type of rating are less likely to default on the mortgage. In addition, higher ratings point to good credit habits. FHA loans are slightly different. While buyers are only allowed two 30-day late payments within two years, they can qualify for financing with a credit score as low as 620.

Meet Down Payment Requirement

Another feature of an FHA-guaranteed mortgage is that you only need a 5 percent down payment to qualify for the loan. This is significantly lower than the 20 percent down required by conventional lenders. Some FHA mortgage lenders ask for 10 percent down if a borrower has a history of bad credit. Meeting down payment requirements is easier if selling another property. If not, you can save for this expense or consider withdrawing funds from a retirement account.

Proof of Employment

Despite lower down payment and credit score requirements, applying for an FHA mortgage loan does require a history of employment and steady income. Lenders who offer FHA mortgages will review your employment history to ensure that you have remained in the workforce for 24 consecutive months. Working a shorter time or having employment gaps can delay buying a home with an FHA lender. Show W-2s, paycheck stubs or ask your employer to write a letter to your lender indicating your time with the company and your income.

24-Months after Rebuilding Credit

Foreclosures and bankruptcies do not prevent an approval for an FHA loan. However, there are stipulations to applying for a mortgage after either occurrence. Even if you can rebuild your credit quickly, FHA mortgage lenders require a two- and three-year waiting period after a bankruptcy or foreclosure.