- You must earn enough income to qualify for the mortgage payments, because FHA mortgage programs limit the percentage of income a household can pay for housing. FHA also establishes a maximum percentage of overall debt versus income. Generally, there are no maximum income limits for FHA loans. However, there are sometimes upper income limits for down payment assistance and other special FHA programs. In addition to meeting income requirements, FHA loan applicants must have a valid Social Security number and must be United States residents.
- Conventional financing typically requires a higher down payment than FHA loans do. FHA down payment requirements start as low as 3.5 percent. This allows borrowers to finance a larger percentage of the home's cost, provided the FHA maximum mortgage loan amount is not exceeded. First-time home buyers often are good candidates for FHA loans, because they may have smaller down payments and tend to buy homes within the FHA loan limits.
- FHA also limits the amount sellers can pay toward closing costs on behalf of the home buyer. If this percentage is exceeded, the amount FHA will lend on the property is reduced. This is because FHA considers the excess amount to be a sales incentive. Each dollar exceeding the current FHA limit on closing costs is subtracted from the sales price before determining the amount that can be borrowed to purchase the home.
- Typically the FHA will not make multiple mortgage loans to the same borrower. Except in cases of relocation or increased family size necessitating the purchase of a larger home, FHA requires an existing loan to be paid in full before obtaining a new FHA loan. This limit is designed to prevent FHA loans from being used to finance investment properties.
Qualifying
Down Payments
Closing Costs
Borrower Limits
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