What Are Some Common Terms and Conditions of FHA Home Loans?

What Are Some Common Terms and Conditions of FHA Home Loans?

Before it insures a home loan, the Federal Housing Authority requires copious information, certain debt-to-income ratios and proof of a history of making credit payments on schedule. The FHA has insured more home loans than any other organization in the world since 1934, when President Franklin D. Roosevelt founded it.

FHA loans are available to people who need to finance more than 80 percent of the value of their home. They are also for people whose credit scores are as low as 580.

FHA home loan candidates must verify they have a stable job. If they prove they are a good credit risk by showing a two-year record of paying bills and debts on time, chances of qualifying for an FHA-insured loan improve. A buyer with bad credit history who's seeking an FHA loan may help his situation with consumer credit counseling.

FHA qualification limits vary from state to state. The FHA has lending limits that also vary from state to state and county to county. The FHA sets debt-to-income ratios to prevent borrowers from buying a home they can't afford. Loans insured by the FHA require mortgage insurance to protect lenders from losses resulting from homeowners defaulting on mortgages.

Local FHA offices set which customary and reasonable closing costs are allowed to be charged to the buyer.