What qualifies you for an FHA Loan?

Mortgage Basics

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Published:

12/6/2021

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What qualifies you for an FHA Loan?

FHA loans in Scottsdale are among the most popular loan program among borrowers. Why? FHA loans are flexible, easy to understand, and great for first-time buyers, buyers with bad credit, or anyone who doesn’t qualify for standard conventional financing.
Understanding how FHA loans work can help you decide if they are right for you as you compare your loan options.

What are FHA Loans in Scottsdale?

FHA loans are flexible loans underwritten by an FHA lender and guaranteed by the FHA. They have lower down payment and credit score requirements and are more flexible regarding a borrower’s debt-to-income ratio.

They are perfect for anyone who doesn’t meet the credit score or debt ratio requirements of a conventional loan.

Despite the name, the FHA doesn’t underwrite or fund FHA loans. Instead, they guarantee them for the lender. If a borrower defaults, the FHA pays back the lender some of the money they lost.

The guarantee allows FHA lenders to offer lower interest rates and fees, making mortgage loans more accessible for borrowers with less than perfect credit or little money to put down on a home.

How do FHA Loans Work?

FHA loans in Scottsdale work just like any other loan. You apply with a lender or a mortgage broker in Scottsdale for even greater variety and provide proof of your qualifications.

If approved, you’ll pay mortgage insurance for the life of the loan at 0.85% of the outstanding loan amount. Your mortgage insurance premiums decrease each year as you pay the balance down.

How do you Qualify for an FHA Loan?

Qualifying for an FHA loan is a lot easier than most other loan programs. If you work with one of the best Scottsdale mortgage brokers, you’ll have options with several lenders, giving you options to find the lender that will accept your qualifying factors.

Each lender has different requirements, but in general, here’s what you need:

  • 580 credit score for a 3.5% down payment (most common)
  • 500 – 579 credit score for a 10% down payment
  • Stable 2-year income and employment history
  • A maximum debt-to-income ratio of 43%
  • No recent bankruptcies or foreclosures
  • Proof you have funds to cover the down payment and closing costs
  • Proof of gift funds if you’ll use them for the down payment
  • Proof you’ll live in the home as your primary residence

 

Final Thoughts

If you think FHA loans in Scottsdale are a good fit for you, let Arizona Lending Group help. We work with the largest number of FHA lenders in the area to give you more options.

FHA loans are just one option we offer. We work closely with our borrowers to determine which loan is right for you. We’ll compare your options side-by-side and help you understand the long-term cost of each loan.

Contact us today to learn more about your loan options and to see if an FHA loan is right for you.

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