Who Is Eligible for an FHA Loan?

FHA loans are given based on financial and personal eligibility.

The Federal Housing Administration insures private loans in order to extend home ownership to more Americans. While income and down payment requirements for FHA loans are low, a borrower must still qualify based on credit and financial need.

Types

There are five main types of FHA loans: first home loans, fixer-upper loans, help for seniors, energy efficiency loans and manufactured home loans. There are a variety of other programs, however, such as the Good Neighbor Next Door Sales Program for teachers, firefighters and public service officials. Search through programs on the HUD website for more information.

Function

The purpose of FHA loans is to help home buyers who are good candidates for mortgages overcome small challenges. For example, a first-time home buyer may have a high income and good credit but lack a down payment, and the FHA can help with its low down payment program. The purpose of the program is not to help those who are not qualified for home ownership; it is designed to make home ownership more accessible for responsible borrowers.

Qualifications

The FHA defines a responsible borrower as someone who:

Has steady employment history

Has a stable income, preferably increasing over the past 24 months

Is free of any bankruptcy filings, Chapter 7 or 13, within the past two years

Has not suffered a foreclosure for three years

Has a generally high record of loan repayment, including a lack of defaults on installment and revolving debt.

References

• HUD: Let FHA Loans Help You

Resources

• HUD: Federal Housing Administration Programs