3479: Who is Eligible For an FHA Loan? by Andrew of Dollar After Dollar on Home Appraisal Standards

What It Covers

Andrew from Dollar After Dollar outlines FHA loan eligibility requirements, including FICO score thresholds, debt-to-income limits, employment history standards, and property disqualifiers, while examining the tradeoffs versus conventional mortgage options.

Key Questions Answered

• •Credit score thresholds: FHA loans require a minimum 500 FICO score with 10% down, or 580+ FICO with just 3.5% down. No income ceiling exists, making these loans accessible to any borrower who meets debt-to-income and employment criteria.
• •Debt and employment requirements: Borrowers must keep total debt-to-income ratio below 43% of gross monthly income and verify two consecutive years of employment history. Recent bankruptcies within two years or foreclosures within three years automatically disqualify applicants from FHA eligibility.
• •Property disqualifiers to check before applying: Homes built before 1978 with peeling paint, missing bedroom egress windows, roof damage, standing water, or electrical and plumbing deficiencies fail FHA minimum property standards. Fix-and-flip purchases are ineligible since FHA loans cannot fund homes requiring future repairs.
• •Mortgage insurance premium cost structure: FHA loans carry an upfront MIP of 1.75% of the loan amount plus an annual premium of 0.85%. Unlike conventional PMI, FHA mortgage insurance cannot be canceled once equity builds, making conventional loans preferable for borrowers with stronger credit profiles.