FHA Loan Qualifications

12 Replies

Hi there,

I am sure this has been covered many times but it is pretty tedious sifting through all the posts to find the right one. I am wondering exactly what the qualifications are when trying to obtain an FHA Loan. I know the minimum down payment is 3.5%, but what is an average interest rate? What is the necessary debt-to-income ratio? How many years of employment do you need to show? What is the seasoning period until I can refinance? How long do I need to live there? Can I get a conventional loan while living there? Can I use a private money or hard money lender while having an FHA Loan? And many more questions.

All information possible, would be fantastic! I have tried to read many articles on FHA loans, but I cannot seem to get a clear cut, all-in-one, in-depth explanation.

I should also probably mention that I my goal is to get an FHA Loan and begin my real estate investing journey.

Thank you!

The details of FHA very, but here are some broad answers (as of June 2018) as they were quoted to me

for MN prpoerties:

  • Interest Rate: 4.2%
  • 3.5% is the minimum down payment
  • DTI is roughly 30% so you can buy a property that's 3x larger than your gross income.
  • 2 years employment history and tax records
  • Seasoning, not sure, likely 1 year
  • Under FHA rules, you must owner occupy for a minimum of 1 year as your primary residence
  • Yes, you can attain additional (only conventional) loans while occupying the property
  • No Private or HML

The best person to answer FHA questions is a mortgage lender/banker

This is helpful for me as well!! Is it possible to buy a property with private money or HML and then refinance into an FHA loan? I am looking at purchasing my first property using the BRRRR method but I would like to do some reno stuff to it as well as. So I am trying to find out how I can initially purchase it then how can I refinance it.

Thank you so much Nathan! I was initially under the assumption that you cannot apply for a conventional loan if you are currently in an FHA loan, or that there was a period I must wait until I can apply for a second loan. Not talking about refinancing here, but purchasing a second property.

Hey Hunter,

Glad this helped you as well! I am pretty sure there is an FHA Loan called an FHA 203k, in which you can purchase a rehab property with an FHA loan. Not definite, but that is the strategy I am trying to do as well.

Originally posted by @Dylan Bednarz :

Hi there,

I am sure this has been covered many times but it is pretty tedious sifting through all the posts to find the right one. I am wondering exactly what the qualifications are when trying to obtain an FHA Loan. I know the minimum down payment is 3.5%, but what is an average interest rate? What is the necessary debt-to-income ratio? How many years of employment do you need to show? What is the seasoning period until I can refinance? How long do I need to live there? Can I get a conventional loan while living there? Can I use a private money or hard money lender while having an FHA Loan? And many more questions.

All information possible, would be fantastic! I have tried to read many articles on FHA loans, but I cannot seem to get a clear cut, all-in-one, in-depth explanation.

I should also probably mention that I my goal is to get an FHA Loan and begin my real estate investing journey.

Thank you!

 The "exact qualifications" can be found here. It's 1009 pages long.

There are no bullet point answers to this far too generic question, or the document above wouldn't be 1009 pages long. This is no different than when someone asks the "exact meaning" of the First Amendment to the US Constitution. There wouldn't need to be lawyers or a Supreme Court if it were that simple. 

The question you should be asking is what are the requirements applicable to your scenario specifically, which will be less than 1009 pages long. Talk to a local lender, or post what specific issue/concern/question you have, since it's not realistic for anyone here to regurgitate 1009 pages in bullet point form. Good luck.

FHA Loans are probably not going to have an interest rate of 4.2% right now and DTI is exceeding 50% currently.

Definitely contact a lender as the interest rate will vary depending on your situation.

Few things, FHA will allow up to a total DTI of 50% including all debt including PITI, 203K loans are available and will finance the cost of improvements (usually contractor is required, no non contractor work allowed or sweat equity), only one FHA loan at a time (unless special circumstances like job relocation, deterioration of neighborhood, ect and you must move more than 100 miles from existing home with FHA loan), you must live in property for a 1 year period (some exceptions are made), you can own other properties and can purchase additional properties with "other" financing (conventional, private and hard money) but during that first year they must be investment properties. Seasoning for refi's is 6 payments completed (it is truly about 7 months/payments) for a streamline refinance that requires borrower to reduce payment or switch from adjustable to fixed or reduce the term, with very little paperwork or qualifications as long as payments are made on time, if you want cash out you will need a minimum of 12 months ownership. Also to refine our of FHA to conventional realistically you need minimum of 12 months to use the new appraised value rather than the purchase price, mostly due to the minimal down payment requirements of 3.5% since you will in theory have no equity to qualify for conventional requirements, but, even if after a year you need to pay MI on the conventional refi, it can be worth it from two standpoints, 1 - you can purchase next home with an FHA loan 2 - eventually the MI is removed on a conventional loan when you have the 20% equity. Hope this helps, let me know if you have further questions, I have been in the Mortgage industry for about 30 years and have done a ton of FHA loans in the past, now doing only Hard Money.

@Dylan Bednarz @Chris Mason Hit the nail on the head there is no simple answer to your question but having said that I actually have Deis approved up to 56% on your total debt taking them ratio FHA seems to have a problem with any housing ratio above 39% conventional ratios can go higher on the housing but lower on the total DTI. It would be best to meet with a local lender to figure out your situation.

FHA Approve Eligible can go as high as 46.99% front ratio and 56.99% back ratio. BOTH of these ratios must work to get an approval and usually a credit score of at least 640 is needed to scrape the top of these ratios.

@Dylan Bednarz

but what is an average interest rate? 

ANSWER: DEPENDS ON YOUR CREDIT

What is the necessary debt-to-income ratio? 

I THINK ITS 41% BUT I WOULD CHECK WITH YOUR LENDER

How many years of employment do you need to show?

IN MY EXPERIENCE 24 MONTHS 

What is the seasoning period until I can refinance? 

12 MONTHS

How long do I need to live there? 

12 MONTHS

Can I get a conventional loan while living there?

YES

Can I use a private money or hard money lender while having an FHA Loan?

YES 

Hi Dylan. Rates are in the high 4's now for an FHA loan. Minimum loan amount is $50,000. The debt to income ratio is a 42 if your score is under 620. If over 620, whatever approves in the system we can do. I have seen DTI's as high as 58 approve. We do not have a cut off DTI for FHA except on the 203k loan. If it approves we do it. We can do a mock application for a borrower to see what will approve for them.