FHA Home Loan Requirements in 2009
Reader Question: “I have heard that an FHA loan is a good option for buyers with little money to put down. But I’ve also heard that the qualification requirements for FHA home loans in 2009 have become stricter. Is this true? What are the basic requirements to qualify for one of these mortgages?”
FHA home loans because have incredibly popular among first-time home buyers in 2009, and there are specific reasons for this. For one thing, mortgage lenders today are requiring higher credit scores to qualify for a loan. Most lenders are also making a 20% down payment mandatory. As a result, there are thousands of home buyers who cannot qualify for a home loan — either because their credit scores are too low, they lack a sufficient down payment, or a combination of these things.
This is where FHA home loan requirements come into the picture. In 2009, FHA loans are becoming a popular financing tool for borrowers who don’t meet the requirements of a traditional mortgage. I’ll focus on the qualification side of things with this blog post, since that is what you asked about. But I’d like to start with a basic overview of what these loans are and how they work.
What’s an FHA Mortgage Loan?
The Federal Housing Administration (FHA) has been around since the 1930s. This organization is part of the federal government, and it falls under the Department of Housing and Urban Development, or HUD. The primary mission of the FHA is to make home ownership available to more Americans. They do this mainly be insuring home loans made by primary lenders (e.g., Bank of America, Wells Fargo, etc.).
When a lender gets this kind of government backing, they are more likely to extend loans to people, even if those borrowers fall short of their core requirements for lending. In other words, a home buyer who has trouble qualifying for a “regular” loan might very well meet the requirements for an FHA home loan.
What are the 2009 Requirements for These Loans?
You’ll notice that the year 2009 is written all over this article. But why? Well, the main reason is that I want to stress the date of this information, because a lot has changed over the last couple of years. As a result of our economic recession, FHA loan requirements and guidelines are slightly different than they were in the past. So much of the information you find online is outdated and inaccurate.
Here is some updated information about FHA home loans in 2009, and what it takes to qualify for one:
Down Payment — This is one of the requirements that has changed this year. The minimum down payment for an FHA loan in 2009 and beyond is 3.5%. Still, this is a lot more affordable than the 20% requirement you would face without FHA backing.
Maximum Loan Size — There are also limits to the size of the mortgage you can take on through the FHA program, as there should be. In 2009, and for the foreseeable future, your loan-to-value ratio (LTV) cannot exceed 100%. In other words, you cannot engage in the “creative financing” tools of the past, such as the 125% mortgage loan. Like most of the FHA requirements, this one makes good sense.
Basic Guidelines — The two criteria listed above represent changes to FHA guidelines. In addition to these things, you’ll have to meet the long-standing basic guidelines for these home loans. This means you’ll need at least two years of steady employment with level or increasing income, a manageable amount of debt, and a solid credit score (probably north of 620).
How Do I Get Started?
If you feel you are reasonably qualified for one of these loans, based on the information I’ve provided above, you should feel confident about taking the next step. And that next step is to request FHA loan quotes from mortgage lenders. If you have had steady income and employment for the last two years or more, you’ve got your debt under control, and your credit score is 620 or higher, I say go for it. You have nothing to lose by getting quotes from lenders.
I can’t tell you how many emails I get from people who ask the question: “Am I qualified for a mortgage loan with a credit score of [fill in the blank]?” Many times, it seems people will ask this question of everyone except the one person who can answer it — a mortgage lender. Go straight to the source, is what I always tell people. Using the Internet, you can find out if you qualify for a loan in no time at all. Use the link I’ve provided above to get started.
This article answers the question: What are the FHA home loan requirements in 2009? If you have a mortgage-related question of your own, use the button provided at the top of this site to email it to us.
April 29, 2009 8:26 am
By Evelyn, June 22, 2009 @ 7:54 am
If I meet all the criteria for an FHA loan, except I own half of my mom’s house, and I’m trying to get an FHA loan for a purchase of my own house, would I still qualify?