FHA mortgages: Your commonly asked questions

FHA has been insuring mortgages for many years and has historically been the most affordable and flexible mortgage option. When researching your options it’s important you’re clear on what kind of mortgage best suits your financial needs.

If you need a program with a low down payment requirement, flexible credit options and allows down payment assistance then an FHA might be right for you.

What kind of credit score do I need?

Guaranteed Rate offers a minimum credit score of 580 with a 3.5 percent down payment while most lenders use 620 as their minimum score. Also, while FHA allows credit scores down to 500 with ten percent down, you’ll be hard-pressed to find a lending institution who will lend on such a low credit score.

Higher credit scores will offer better rates and a lower monthly payment. Your first step when buying a home, should be a credit pulse-check. This will ensure your credit report is error-free and allow you to manage any negative accounts before you buy a home.

Learn to better understand your credit, the first step when buying a home.

How do I know if I can afford a home loan?

Lenders use what’s called a debt-to-income ratio (DTI) to figure out how much of your income will go toward your new housing payment and monthly debt (what is found on your credit report). This ratio will tell your lender how much house you can afford.

FHA suggests a back ratio no higher than 43 percent, but FHA is typically flexible and has been known to exceed 43 percent.

Learn how to calculate how much house you can afford.

How much will I need to put down?

Check out this simple chart that offers your FHA down payment options:

Learn more about other down payment options and lending programs.

Can I get help from a family or friend to pay for closing costs?

FHA is fairly flexible with gifts for down payments and closing costs; however, they are very strict about the source of the gift funds. FHA does not allow gift funds from anyone involved in the sale or purchase of your home.

Acceptable sources for gifts:

  • Relatives
  • Close family friend
  • Employer
  • Agency sponsored homeowner assistance programs

Reserve Requirements

Reserves are the savings you will be left with after you close the loan for your home. One month’s reserve is equal to one month’s mortgage payment (principal, interest, taxes, insurance and mortgage insurance).

If you’re buying a single family home, condo or 2-unit multi-family FHA will not require reserves; however, when purchasing a multi-family 3-4 unit, two–three months will typically be required.

When shopping for a mortgage, you should discuss all of your options with your seasoned mortgage professional.

Guaranteed Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture or any other government agency.

 For more consumer-friendly mortgage education visit Guaranteed Rate often.

Continue Your Guaranteed Rate Education

How to Manage Your Credit
Why are You Selling My Mortgage


Your mortgage. Your way.

Get started on your Digital Mortgage!
All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.