If you're in the market for a new home or want to refinance your existing mortgage, you may want to consider a loan insured by the Federal Housing Association (FHA). An FHA loan attracts home buyers with low incomes and those needing low down payments who may not qualify for conventional mortgages. It also appeals to lenders because of the protection it offers - and while the FHA doesn't actually give the loans, they insure them. So if homeowners default on the loans, the lender is protected from the loss by the FHA insurance. However, in order to get FHA insurance on a home loan, the lender must follow the FHA loan requirements in approving and setting up the loan. And borrowers who understand the FHA requirements early on in their house hunt will be better prepared to get financing once they find their dream home or are ready to refinance their mortgage.

Here's the rundown of FHA loan requirements.

Minimum Credit Score Needed

An important part of your loan application is your credit record, including your credit score. As of June, 2015, borrowers with a credit score of at least 580 may qualify for FHA loans. If your credit score is between 500 and 579, you may be eligible for FHA financing as long as the loan-to-value (LTV), the percentage of the home loan compared to the value of the property, is 90 percent or less, so you'll need a down payment of at least 10 percent of the purchase price. If you are applying for a home loan with a co-applicant, such as a spouse, each of your credit scores will be taken into consideration, and the decision will be based on the lower score.

Minimum Down Payment Needed

If you're considering one of these loans as a way to get into the housing market, you'll need a down payment. However, FHA loans require borrowers invest just 3.5 percent of the purchase price as a down payment, welcome news for first time buyers. And with annual insurance premiums slashed at the beginning of 2015 from 1.35 percent to just .85 percent of the loan amount, first time buyers with minimal down payments get an even better break.

FHA Income Requirements

HUD doesn't usually have income requirements for FHA loans. However, you do need to provide information to show you have enough income to carry your current monthly debts and other obligations, and to cover the monthly payment and insurance premium of the home loan you're applying for. As of January 1, 2013, applicants usually require a debt-to-income ratio not exceeding 43 percent, though in some cases the application may be manually approved with DTIs up to 45 percent.

Clear CAIVRS Needed

An important requirement for FHA-backed loan eligibility is a clear CAIVRS report. The Credit Alert Verification Reporting System (CAIVRS) is a federal government system for tracking people with delinquencies, or who have defaulted, or been foreclosed upon for money they owed to the government. This includes federal student loans, other FHA loans, and Small Business Administration (SBA) loans.

If your delinquency was paid in full, or is currently under a federally-approved repayment plan (it must be approved by the government agency that holds the original loan), you may be eligible to apply for an FHA loan. But, if the delinquency was for a previous FHA-backed loan, you'll have to wait at least three years from the time that the Department of Housing and Urban Development (HUD) paid the mortgage lender's insurance claim.

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Residence Type

FHA-insured loan requirements regarding minimum property standards are pretty strict when it comes to safety and living conditions. Properties must meet national and/or state building codes, and must be "marketable" single-family units. They may include condominiums, townhouses, duplexes, and single family residences. FHA loans are also available for purchasing or refinancing manufactured mobile homes.

When Can You Use an FHA Loan?

Contrary to popular belief, FHA loans aren't just for first-time homebuyers. Homeowners may use FHA loans to make energy-efficient home improvements to their current eligible properties via the FHA Energy Efficient Mortgage Program. And homeowners over the age of 62 with low mortgage or no mortgage balances may qualify for an FHA Reverse Mortgage, which may let you access a portion of your home's equity as cash to spend on whatever you like.

FHA Loan Requirements You May Not Know About

If you have a bankruptcy, short sale, or foreclosure in your not-too-distant past, you may still be eligible for an FHA-backed home loan. Recently FHA regulations changed, allowing some home buyers in these situations to apply for loans after just one year, instead of waiting two or three years (depending on the credit issue) as was previously the case. From the period August 15, 2013, through September 30, 2016, home buyers may apply under the FHA's Back to Work -Extenuating Circumstances program. However, take note - the lender ultimately makes the approval decision, and may have stricter lending requirements than the FHA.

Another thing to keep in mind is that FHA loans do come with geographically-dependent limits. To find the FHA limit for your preferred area, visit HUD.gov's FHA Mortgage Limits page.

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