FHA Loan Qualifications: Learn the guidelines to qualify in 2022

By Erik Sandstrom – To find out the qualifications, guidelines and requirements to apply for a Federal Housing Administration (FHA) loan in 2022, read the guidelines below. This will help you learn more about what to expect when applying for a mortgage.

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Hi, my name is Erik Sandstrom. I’m LoanSafe.org’s mortgage expert and a senior loan officer with Prime Lending.

If you need help with an FHA Loan, please call me anytime at 619-379-8999 or by email [email protected].

(April 7, 2022) – FHA loans are mortgages that are granted by the Federal Housing Administration (FHA) to purchase or refinance one to four-unit owner-occupied residential properties, condominiums, and manufactured homes.

These loans are not funded by the FHA, but are instead a guarantee that the loan will be repaid if the borrower defaults.

The program is managed by the U.S. Department of Housing and Urban Development (HUD). 

FHA requirements are generally flexible and lenders may look into compensating factors for borrowers who have less than perfect credit scores and/or past credit issues.

In general, borrowers must have a stable income and employment history to qualify for the loan amount, proof of U.S. citizenship, a minimum down payment, and purchasing a property for primary use – investment homes are generally not allowed.

FHA loans are also extremely popular among first-time home buyers and are much easier loans to secure than regular conventional mortgages. 

As long as you don’t have another mortgage already and you meet the requirements, you should be able to get approved for an FHA loan with ease.

Aside from the typical first-time homebuyers, someone needing to refinance a mortgage can benefit from FHA loans as well.

Current guideline changes permit for a cash-out refinance of up to 85% of the appraised value of the home.

FHA allows for up to 95% of appraised value.

This deal has the same credit score requirement of 620, with most banks funding FHA loans. If a refinancing homeowner already has an FHA loan on the property, he or she can do an FHA Streamline loan.

This loan does not require a reappraisal of the property or pre-qualifying for the loan if he proves that he has had a clean payment history.

Below you will find all the important details you will need to know to get educated about this government-sponsored loan program, whether you are a home buyer looking for a great mortgage, or a current homeowner searching for a loan to refinance.

Who benefits from FHA loans?

-First-time home buyers

-Young families

-People just coming out of renting for years

-Those who have just recovered from a long term credit issue like foreclosures and bankruptcies

-People with lower credit

-Someone who needs to refinance

Types of FHA Loans Available

-30 year fixed rate

-15 year fixed rate

-A few adjustable rate programs are available

-203k purchase loan- used for renovation of the property that’s being bought

-100% FHA Loan For Building Rural Areas

Guarantees from HUD


This type of loan is one of the more lenient mortgages when it comes to credit as they can be very understanding of certain financial situations.

The FHA credit score requirements are a minimum FICO score of 580 to qualify for the low down payment advantage, which is a 3.5 percent down payment home loan.

If your credit score is below 580, however, you aren’t necessarily excluded from FHA loan eligibility. You can put 10% down, and you may qualify for an FHA home loan with a credit score as low as 500.

If you already have an FHA loan and want to refinance it, the FHA streamline refinance program may be what you need; it has looser credit requirements than traditional refinances.

To qualify for the FHA streamline program, you must have made at least six payments on your existing FHA loan, and you must have owned the property for at least 210 days. You also can’t have done an FHA streamline, or any other type of government-backed loan modification, in the past year.

An FHA Streamline Refinance is also known as a “no-cost” refinance because you can use your current home’s value for equity, and the lender will cover closing costs associated with refinancing. This means you don’t have to pay out-of-pocket for the expense of refinancing.

FHA has even allowed consumers who have suffered from foreclosure, bankruptcy, or short sale due to economic reasons that affected their household income, to qualify for another FHA loan within 1 to two years through FHA’s Back to Work Program.

If you can prove that the loss of your home or credit was caused by a 20% income reduction in the last six months before you lost your home; that you have financially recovered since your financial hardship/loss of your home; that you maintained a decent credit score when your economic hardship took place, and that you have completed a minimum of one hour of one-on-one housing counseling from a HUD-approved housing counseling agency.

However, if you have any federal liens, like tax liens or defaults on student loans, then you will not be eligible for an FHA loan.

Down Payment

Low down payments are one of the primary attractions for FHA loan programs. 

FHA allows down payments that can be lower than 3.5%, depending on other variables such as your credit score, which I mentioned above.

They also allow a homebuyer to pay down payments with money that was borrowed or received as a gift, relative, friend, employer, charitable organization, or government agency.

Other closing costs can vary from 1% to 4% of the loan cost.

Typical fees will include but are not limited to mortgage origination, deposit verification, attorney services, home appraisal, title insurance and examination, document preparation, property survey, and credit report fees.


FHA loan rates are very competitive rates and this will equate to lower payments every month when you pay your mortgage payments.

As of this writing, the average 30-year rate on FHA-backed loans is 4.68 percent as of this writing, according to data provided by Ellie Mae, an industry software provider.

Debt to Income

When you apply for a mortgage, lenders will look at your debt-to-income ratio to determine how much of a loan you can afford. A high ratio can prevent you from qualifying for a home loan.

The Federal Housing Administration, or FHA, requires two ratios. The front-end ratio looks at your housing costs compared with your gross income. The back-end ratio does the same, but it also includes all of your other monthly debt payments.

The FHA allows for a high debt-to-income ratio. In general, they will usually require that your ratio be at least 29/41 and as high as 50 on the back end. As long as you believe you can afford the payment, the FHA may allow a 50 percent debt-to-income ratio.

FHA guidelines allow you to use compensating factors to help qualify if you have a high debt-to-income ratio. These factors can include but are not limited to having a high credit score, a high amount of reserves in the bank, and making a large down payment.

Property Requirements

FHA has certain minimum property requirements and standards a property must have in order for them to insure the loan.

Although FHA is more lenient than other mortgage insurers, any property that is going to be funded must meet minimum construction guidelines to ensure the soundness and safety of the property.

These include the repair of any defective work on the house, poor quality work, leakage, decay caused by termites, or any other condition that impairs its safety, sanitation, or structural soundness.

For example, the home cannot be in major need of repair and has structural damage. It must have the electrical, gas, water, and all appliances on the premises in working order.

Sufficient space for living, sleeping, and specific areas for cooking and dining must be available, as well as sanitary facilities such as bathrooms (not limited to) with functioning showers/tubs.

Any excessive pollution, radioactive materials, mudflows, or other hazards must be dealt with before FHA financing can take place.

If any items are considered health and safety hazards in and around the home, then this will be cause for denial. In other words, the property needs to be in livable condition by meeting the basic level of sanitary and safe living with all its appliances in working order and no potential safety hazards. 

Loan Amounts

There is a maximum loan limit that will vary by location. In certain (low cost) areas the FHA will only insure loans up to $272,500.

For 2021, the FHA increased its ceiling from $729,750 to $822,375 in many high-cost areas like San Diego, Los Angeles, and New York.  

Before considering an FHA loan, it’s wise to first check the FHA loan limits in your area to ensure this type of financing fits your needs.

Private mortgage insurance (PMI)

All FHA lenders will charge a borrower for PMI, unless they pay a full 20% down payment when buying a home.

Lenders will require both upfront mortgage insurance premiums (UFMIP) and annual premiums.

Upfront mortgage insurance premium (UFMIP) — This one-time premium is equal to 1.75% of the loan amount and can be bundled into the loan.

Annual mortgage insurance premiums (MIP) — There are two types of annual MIPs: those charged on 15-year loans and those charged on 30-year loans, which may be canceled after 11 years. The rates for both types of MIPs are set by the Federal Housing Administration at a rate of 0.80% to 1.05%.

Borrowers must pay MIP for either 11 years or the life of their loan, depending on when they bought their home and how large their down payment was.

For borrowers with less than a 10% down payment, including the well-known 3.5% down payment program, the FHA will collect the annual premium for the life of the loan.

On the other hand, for loans closed before this date, the annual premium costs may be eliminated once the borrower has paid mortgage insurance for five years – as well as an LTV of 78% or less than the purchase price or market value.

Now those are the basics with FHA loans.

Below you will find the most common questions we get from consumers.

Can a relative help with the down payment?

Yes, gift funds are allowed for FHA loans.

These funds may come from a relative, an FHA-approved charity, or a government agency. Gift funds cannot come from a source that has an interest in the property, i.e. seller, builder, or lender. The gift funds must also be accompanied by an FHA gift letter, showing proof that the funds belong to the donor.

Will the FHA insure manufactured or multi-unit properties?

Yes, the FHA generally insures all property types, assuming the property is purchased as a primary residence.

Prospective homebuyers can use FHA financing for single-family homes, townhomes, condominiums, manufactured homes in addition to multi-unit properties (up to 4).

For multi-unit properties, the borrower must plan to reside in one of the units. Condominiums as well as townhomes listed as “condominiums” will need to be FHA-approved.

Do FHA loans come with fixed or adjustable interest rates?

FHA loans have a variety of programs to choose from, including fixed and adjustable-rate options. The more common FHA ARMs include 5- and 7-year terms.

This means that the initial interest rate will be fixed for five to seven years, then will adjust according to the margin and be subject to a “rate cap.” 5-year ARMs typically don’t allow more than a 2% rate increase after the initial fixed period, a 2% rate adjustment annually thereafter, and never more than a 6% increase throughout the loan.


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