An FHA loan is guaranteed by the federal government against default, which means that if you stop making your payments, the government will reimburse the lender for any losses it takes. With such a guarantee at risk, you would think FHA loans would be hard to come by. But it's actually fairly easy to qualify.
To qualify for an FHA loan, you don't need a great credit score. Though lenders have some flexibility, you generally only need a credit score of 580 to qualify. You might be able to get an FHA loan with a lower score, but in that scenario, you would likely have to come up with a bigger down payment than the 3.5 percent that is normally required.
Generally, FHA loans use a 31/43 debt ratio for qualification. The first number represents that percentage of your monthly income that can go toward your mortgage payment. So, that means that your total mortgage payment, including principal, interest, taxes and insurance, can be more than 31 percent of your gross income. The second number means that your total loan debt, including student loans, car loans and credit card debt, shouldn't exceed 43 percent of your monthly income. lenders do have some flexibility here and may be able to qualify you with higher ratios if you have a high credit score or there are other circumstances.
The other main qualifying factor for an FHA loan is the amount of the loan. This factor depends largely on where you live and what kind of property you are buying. In most parts of the country, the maximum loan amount ranges from $271,050 for a single-family home up to $521,250 for a four-family dwelling. However, there are higher limits in places where the cost of housing is higher.