FHA : What is it and what does it take to purchase?

So…you are tired of renting and looking at the idea of purchasing a home.  What’s that mean?

Well, you have plenty of options available to you.  One option (perfect for first time homebuyers) is looking into an FHA financed mortgage.  Why?  Well, here you go :


  • Downpayment of 3.5% of sales price
  • Minimum credit score of 580 (500-579 require a 10% downpayment)
  • Mortgage insurance premiums rest at 0.85% as of 01/15.
  • Debt to income ratio of 31%(front end) and 43% (back end) ratio. Meaning…31% towards housing cost and 43% toward housing cost and living expenses.

Easy, right?  Well, FHA does have a stringent appraisal process as well.  This means they look for several items to make sure the homebuyer is in a position to live in a home comfortably and not in a money pit.


Certain redflag items include the following :

  • Loose handrails
  • Peeling paint
  • Assurance that the lot is graded away from the home to prevent moisture issues
  • Heating system must create a comfortable living situation in each room
  • Roof in good state of repair
  • Foundation in good state of repair

To quote : HUD Handbook 4150.2, the home “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants.”


  • Lenders set their own minimum credit score (“overlay”) requirements with FHA.  So, if one lender won’t approve you with a score of 585, call around to other mortgage lenders in the area.
  • When a lender pulls three credit scores, the one in the middle is the one that sticks.  When only two scores are pulled, the lower number is the number that is taken.