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Applying for a Federal Housing Administration (FHA) mortgage entails meeting the lender’s criteria, providing your financial information, and complying with additional lender requests. Learn about the requirements for these mortgages and the process for how to apply for an FHA loan.
Federal Housing Administration loans are a type of mortgage insured by the government. They've been helping people become homebuyers since 1934. Because these loans pose less risk to the lender, lenders are more willing to accept borrowers with lower credit scores and smaller down payments.
You may have heard that you should have a down payment of at least 20% ready before buying a home, but few people follow that advice. With FHA loans, you can buy a home with a down payment as low as 3.5%. According to the National Association of Realtors, the typical down payment for first-time homebuyers was just 8%, as many homeowners take advantage of FHA mortgage benefits.
That's because "FHA loans have more lenient credit score requirements [than other mortgages], providing an opportunity for individuals with less-than-perfect credit to qualify for a mortgage," said Carl Holman, director of communications with A&D Mortgage.
For example, the average sales price of a home purchased with an FHA mortgage was about $350,000 as of the end of the first quarter of 2024. If you followed the traditional guidance of saving 20% for a down payment, that means you'd need at least $70,000 in the bank. By contrast, an FHA loan—with a down payment minimum of just 3.5%—would allow you to become a homeowner with just $12,250.
These loans aren't for everyone. For those with good credit and a down payment of at least 10%, FHA loans may be more expensive than conventional mortgages, so it's wise to explore other options.
There are nine main steps to applying for an FHA loan from a mortgage lender:
You can save time by preparing and gathering the following information:
Besides your FHA down payment, make sure to budget for closing costs, which can be 2% to 5% of the home purchase price.
To qualify for an FHA loan, you must meet the following minimum requirements:
An FHA loan must be for an owner-occupied principal residence, meaning you intend to buy and live in the home. It's possible to purchase multi-unit properties, such as condo or duplex buildings, with FHA loans, but you must live in one of the units as your primary residence.
Not all mortgage companies are approved to issue FHA loans, so finding an appropriate lender is a critical first step. To find a lender in your area, use the U.S. Department of Housing and Urban Development (HUD) Lender List Search tool.
Once you've found a lender, you can fill out an application. Many lenders allow you to complete and submit the FHA mortgage application online. The application will ask for your personal details, including your Social Security number, address, employment, income, and assets. You will also need to provide your consent for a hard credit check.
Your mortgage lender will require you to submit copies of the documentation listed above, such as your tax returns and pay stubs.
If the lender approves your application, the lender will provide you with some different loan options. For example, FHA loans can have terms of 15 or 30 years. A longer-term will give you a more manageable monthly payment, but you'll pay more in interest.
FHA mortgages require appraisals that differ from those on homes purchased with conventional mortgages.
"The underwriting process for FHA loans can be more complex and lengthier than conventional loans due to the additional documentation and scrutiny required by the FHA," Holman said.
The FHA appraisal ensures the property meets HUD's requirements for safety standards and structure condition. The lender will order the appraisal for you, and the report will note any concerns or necessary repairs.
Depending on the severity of any issues found, the property may need to be repaired before the deal can close.
After the appraisal, the lender will complete the underwriting process to finalize your loan and schedule your loan closing date. At this point, you'll also need to get title insurance and provide proof of homeowners insurance.
When applying for an FHA loan, avoid applying for new credit cards or loans or making larger purchases until after close; any changes to your credit report could cause a loan denial.
Finally, the lender will work with you to set a closing date. At closing, you sign the final documents and receive the keys to your new home. Then, you will officially be a homeowner.
Although FHA loans offer many benefits, some other programs may be a better fit for your circumstances.
The first step in applying for an FHA loan is to research the program requirements to determine whether you qualify. You'll need a credit score of at least 500 (580 to qualify for the lowest down payment) and a down payment of at least 3.5%.
You can apply for an FHA loan if you're single or married, as long as you are a U.S. citizen or permanent resident alien.
The entire FHA mortgage process, from the time you submit the application to the closing date, can take 30 to 60 days.
FHA loans are relatively easy to get compared to other mortgage options, such as conventional loans, because they have lower credit and down payment requirements.
You can purchase a home with an FHA mortgage with as little as 3.5% of the home's price as a down payment. However, you'll also need 2% to 5% for closing costs. Assuming the house is $300,000, you should save at least $10,500 for the down payment and $6,000 to $15,000 for closing costs.
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