What Are the Requirements for an FHA Loan?
by Phil M. Fowler
FHA loan approval can be easier to obtain than conventional mortgage loan approval.
Maximum Loan Amount
To qualify for an FHA loan, you must seek an amount that falls within the parameters set by federal regulations. The purpose of the FHA program is to increase home ownership among lower- and middle-class Americans. To carry out that purpose, the FHA imposes a maximum mortgage loan amount, which varies depending on the area where you live. You can never exceed the maximum loan amount for your area.
Another requirement for an FHA loan is that you must have the ability to repay it. To make that determination, the FHA will look at your debt and compare it to your income level. Under FHA guidelines, your monthly mortgage debt should generally not exceed 29 percent of your before-tax monthly income. Additionally, long-term debt--which includes obligations that will extend for more than 10 months,
such as car loans, student loans and your mortgage--collectively should not exceed 41 percent of your before-tax income. The FHA allows a small exception to the general rules, however, if you have significant assets, a large down payment or a great credit score.
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