FHA mortgages offer a wide range of benefits and
consumer protection that conventional loans may lack. Some of the most
attractive things about an FHA mortgage are the low down payment and
more lenient credit requirements. FHA loans are, simply put, easier to
qualify for than conventional mortgages.
FHA loans are insured by the Federal Housing
Administration. FHA does not lend money or issue credit, so the first
requirement of the FHA loan program is to apply for the FHA mortgage
through a participating FHA lender.
When you apply for an FHA loan to purchase a new
home, you’re required to submit detailed information on your existing
credit, employment history, and current income.
FHA lenders evaluate this information based on something called “the four C’s”
- Credit history
- Capacity to repay
- Cash assets available to close the mortgage, and
- Collateral
According to the FHA, the lender must evaluate all FHA loan applications by:
- Considering the type of income the borrower needs to qualify
- Analyzing the borrower's liabilities to determine creditworthiness,
- Reviewing debt‐to‐income ratios and compensating factors.
- After meeting the above criterion, you have the necessary requirement to get a loan pending the approval of he authorities.
