What Are the Requirements for an FHA Loan?

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When most people hop onto search engines and start looking for an FHA lender near me, they can easily get confused when getting all sorts of different answers.

An FHA loan is one that is insured by the government directly, and it’s a mortgage that is fully insured through the Federal Housing Administration. Typically, these loans have lower entry barriers than traditional mortgage loans, making them attractive for people who have poor credit or otherwise cannot meet conventional mortgage requirements.

Here’s what you need to know about FHA loans before you apply for one.

Credit Score

When applying for most loans, particularly mortgages, your credit history plays a very important role. Usually, if it isn’t at what could be considered a good level, the bank won’t even look into your application any further. They will see your credit score and turn you down automatically.

But with an FHA loan, you have more options. Your credit score can even be poor, and you may still be able to get approved for the loan. The FHA has measures in place to provide assistance to people who have less than stellar credit histories.

Closing Costs

Another obstacle for many homeowners taking out a mortgage is the closing cost of the house. But with an FHA loan, it is possible that your closing costs will be covered. In many cases, the FHA will work with realtors and builders to cover some or all of the closing costs for the lender. If they agree to do that for you, though, it is likely that you will have to pay higher than normal interest rates. It’s best to look at the full cost of all your options before making a decision.


Be prepared to pay two different premiums for an FHA loan. Your first one will be the upfront cost. That’s typically 1.75% of the loan amount. After that, you will be paying the annual premium. Despite the name, it’s a cost you will be paying each month. All FHA annual premiums are under 1%, but the exact percentage varies based on how long you will have the loan for, how much you borrowed and the loan-to-value ratio.

Down Payment

There will be an initial cost for the loan that will typically be for 3.5% of the home’s purchase price. This down payment can be substantial. But you have some options when paying it. You can take money out of your own savings accounts to pay for the cost, or you can receive gifts from friends and family members to cover it. There are quite a few different ways you can source the money needed, so don’t give up on the loan until you look at your options.

Payment Relief

While you will have to prove that you are capable of paying the FHA loan consistently, you may be given some relief if you run into trouble after the loan has been approved. If you feel like you are in over your head, you can check with your loan servicer about temporary relief. This usually isn’t the same as forbearance, but it can provide relief from a payment or two as you get your finances in order.

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