FHA Loans

Many people in the “challenged credit” range will find success through an FHA Loan. These are government-insured loans backed by the Federal Housing Administration. Because these loans are backed by the federal government, restrictions from lenders are less strict—in some cases, approval can even be seen when the individual has experienced foreclosure or bankruptcy.
Borrowers seeking loans backed by the Federal Housing Administration need to possess a debt-to-income ratio of 43% or less, a score of 580 or higher, and provide a down payment of at least 3.5% (10% if under 580). For more detail, check out this link to the FHA requirements. You may also want to take a look at FHA loan limits. These vary from state to state based on the typical loan limits set by Fannie Mae & Freddie Mac and other factors, such as the local real estate market and the type of home the borrower is looking to purchase. Also be sure to ask your home loan officer about balloon payments and prepayment penalties, as these can come as a surprise to first-time borrowers.
For more specific information, please read our section on FHA Loans by State.

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