Not all homebuyers can qualify for conventional home loans, so the FHA helps by insuring the loan. FHA does not lend the money, but rather, they promise to pay a portion of the loan if the homeowner/borrower is unable to pay. This makes it easier for lenders to give home loans to first-time homebuyers and homebuyers with less than perfect credit. HUD develops the eligibility requirements for borrowers and the underwriting procedures for the lenders. You begin by applying for a loan through an approved FHA lender, such as Essex Mortgage.
While FHA loans are great for first-time homebuyers, they are open to everyone. There is no income limitation because the FHA focuses more on a borrower’s ability to repay the loan. FHA considers your repayment history, job and income verification, and credit score. However, there are some FHA loan limitations, but ZIP codes determine these. Your credit score will determine how much your down payment will be. For example, if you have a credit score of 580 or higher, then the down payment could be as low as 3.5%, while a score lower than 580 may require a larger down payment.