There comes a point in our lives where we need to borrow money. Whether it be from a friend or the bank, getting money upfront is sometimes necessary to pay for your bills and get through tough times in life. At other moments, earning money upfront from your bank is a normal way to help low-to-income borrowers earn money without having to earn a higher credit score.

For people trying to purchase a home for the first time, it is natural they might be looking for some help from the bank to afford these great expenses. If you can pay a small percentage of your mortgage and you have a good credit score, chances are you can apply for this financial help from an approved lender!

Learn about FHA loan qualifications – qualifications might change every year!

FHA loan qualifications, also known as the Federal Housing Administration loan, is a mortgage that is specifically designed for low-to-moderate-income borrowers that need a lower down payment and lower credit scores than traditional bank loans. Last year in 2020, homeowners could borrow nearly up to 97% of the value of their proposed home with an FHA loan, meaning you only have to make a downpayment of around 3% for your dream home – seems like a good deal, right?

Along with these qualifications, you need a credit score of at least 580 – if your credit score is too low, you can instead pay up to 10% of your down payment with less credibility. Due to their ease of use and simplicity in getting when compared to traditional loans, FHA loans are usually a popular option among people looking to buy a home for the first time. 

Let’s see the new 2021 qualifications for earning an FHA loan for buying a house! Since the qualifications might change every year, we need to stay up to date on the latest qualifications. 

• Applicants need a FICO credit score of at least 580 to pay only a 3.5% down payment
• If the applicants’ credit score is less than 580 and falls between 500 and 579, they can pay a 10% down payment
• A mortgage insurance premium is necessary
  • A mortgage insurance premium is a fee paid by homeowners who take out an FHA loan. The purpose of this fee is so FHA lenders have higher protection against risky borrowers. 
• The debt to income ratio must be less than 43%
• The home must be the applicant’s main residence
• Borrowers and applicants must have steady income and proof of employment

As you can see, borrowing money through an FHA loan is not a complicated or hard process – you just need to make sure you fit all of these qualifications to apply for money! 

Conclusion

Using an FHA loan is a popular way for first-time homebuyers to afford this big expense. Instead of having to acquire an Excellent credit score or a very low debt to income ratio, those who apply for this type of loan only need the basic requirements to qualify for a loan to help them purchase a new residence.