What Is An FHA Loan?
FHA loans are backed by the Federal Housing Administration (FHA), an agency under the jurisdiction of the Department of Housing and Urban Development (HUD). FHA loans are insured by the FHA, which simply means that the owners of your mortgage are protected against loss if you default on your loan.
FHA Loan Requirements
There are certain requirements borrowers must meet to qualify for an FHA loan, including:
- The home you consider must be appraised by an FHA-approved appraiser.
- You can only get a new FHA loan if the home you consider will be your primary residence, which means that it can't be an investment property or second home.
- You must occupy the property within 60 days of closing.
- An inspection must occur, and the inspection must report whether minimum property standards are met.
There are a few more specific conditions to qualify, including a down payment amount, mortgage insurance, credit score, loan limits and income requirements. Mostly, the FHA requirements to qualify for a mortgage are the same for DACA recipients. We'll explore these factors in more depth below.
FHA Loan Down Payments
Your down payment is a percentage of the purchase price of a home and is the amount you put down for that home. The minimum down payment you're able to make on an FHA loan is directly linked to your credit score. Your credit score is a number ranging from 300 to 850 that's used to indicate your creditworthiness.
An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher. If you can make a 10% down payment, your credit score can be in the 500 - 579 range. Rocket Mortgage® requires a minimum credit score of 580 for FHA loans. A mortgage calculator can help you estimate your monthly payments, and you can also see how your down payment amount affects them.
Note that cash down payments can be made with gift assistance for an FHA loan, but they must be well-documented to ensure that the gift assistance is in fact a gift and not a loan in disguise.
FHA Mortgage Insurance
You'll pay a mortgage insurance premium (MIP) for all FHA loans. Mortgage insurance is put into place to protect the FHA against losses if you default on your loan.