Applying for an FHA loan can be a complex and sometimes time consuming process.
The lender that you apply to for an FHA loan must meet numerous guidelines for loan application, processing and approval as mandated by FHA regulations and rules. In addition, lenders can impose their own eligibility requirements as deemed appropriate so there may be some variance in approval standards by different lenders.
Lenders must ensure that basic FHA guidelines are adhered to in granting loan approval in order to have the loan insured by the FHA. The FHA itself does not lend money directly to borrowers but rather through a lending network of approved lenders that participate in HUD programs.
As noted above, despite some variance in underwriting guidelines by different lenders, every borrower applying for FHA financing must meet minimum eligibility requirements as set forth by the FHA.
In order to be considered for FHA financing, every borrower must conform with the following eligibility requirements.
- The borrower must be of legal age as set forth by law to sign for a mortgage.
- The borrower must be able to verify that he has sufficient income to make timely payments on the mortgage and other debts. Contrary to the belief of many, the FHA does not have a maximum income limit. The FHA program is available to both low and high income groups. An FHA borrower should consult with an approved lender to determine if income is sufficient for the loan amount being applied for.
- The borrower must meet certain credit qualifications as set forth by FHA guidelines. Some lenders may impose higher credit standards, so a borrower should contact a number of different lenders to determine eligibility. Each lender contacted will be able to tell the borrower if the credit is sufficient for loan approval.
- The borrower must have a valid social security card and be a lawful resident of the United States. Each lender is required to verify the authenticity of a borrower’s social security number.
The FHA established credit and income guidelines in order to ensure that the borrower has the financial capacity and will to make timely payments on a mortgage loan. Although some of the rules may appear to be strict, the goal of the FHA is to promote sound home ownership.
Lending guidelines that were far too liberal in the past allowed home buyers to borrow far beyond their ability to make the monthly mortgage payment which has resulted in a flood of foreclosures. By imposing reasonable guidelines on FHA applicants, the FHA is not only promoting a sound housing market but also protecting the consumer.