The Federal Housing Administration produces guidelines and requirements that FHA-approved mortgage lenders must use when determining the eligibility of FHA loan borrowers, according to the U.S. Department of Housing and Urban Development. FHA guidelines also cover other mortgage-related items like income limits, mortgage insurance requirements, closing costs, downpayments, credit qualifying and lending limits.
The FHA is a governmental agency within HUD that provides approved lenders with insurance on FHA loans. The FHA does not provide mortgage loans to borrowers directly, instead they guarantee the FHA loans that are issued by FHA-approved lenders, and then the borrowers receive the money from the FHA-approved lenders, according to HUD. The FHA helps at-risk borrowers to qualify for loans by reducing the risk that lenders assume when issuing mortgage loans.
Some guidelines list the types of properties that a borrower can purchase with an FHA loan, while other guidelines state the minimum qualifications that a borrower must meet for loan eligibility, as reported by Investopedia. For instance, FHA guidelines state that the borrower must be a first-time home buyer and that the home must be the borrower's principle residence and owner-occupied. Additionally, the borrower must meet specific guidelines for employment, income, credit and debt-to-income ratio.