FHA Loan Requirements for 2023 - 2006 all over again

[edjr 7,033]

https://www.nerdwallet.com/article/mortgages/fha-loan-requirements

Quote

 

Mortgages backed by the Federal Housing Administration have different requirements from other types of home loans. Though you don't have to be a newbie, FHA loans are often popular with first-time homeowners because they couple lower down payment requirements with more lenient standards for credit scores and existing debt. Here's a rundown of the key FHA loan requirements.

FHA minimum credit score: 500

FHA guidance allows lower credit scores, which is one reason first-time home buyers are often attracted to FHA loans. The FHA lets borrowers with credit scores as low as 500 be considered for home loans.

However, it's important to bear in mind that while the FHA sets out guidelines for credit score minimums, FHA lenders may require higher minimum scores. FHA loans don't come directly from the government; the FHA insures them on behalf of the lender. Despite having that as backup, lenders often choose to minimize their risk by mandating higher credit minimums. This is one of the reasons why it's smart to shop and compare FHA lenders. Not only might they have different qualifications, but you can also weigh different lenders' rates and fees.

It's worth noting that even with a lender who's following FHA guidelines to the letter, you'll get better terms (like a lower down payment and more allowance for existing debt) if you have a higher credit score. A stronger credit score should also help you get a better FHA mortgage rate.

FHA minimum down payment: 3.5%

With an FHA loan, the minimum down payment depends on your credit score. If you have a credit score that's 580 or higher, the minimum down payment is 3.5%.

If your score falls between 500 to 579, the minimum down payment required is 10%. FHA guidelines sometimes refer to this as the Minimum Required Investment (or simply the MRI, which can be confusing) — it just means the down payment.

FHA debt-to-income ratio: 50% or less

Lenders pay attention to your debt-to-income ratio regardless of the type of mortgage you get, but the FHA actually looks at two different ratios.

The first is simply the ratio of your proposed monthly mortgage payments to your monthly income. The FHA calls this your Total Mortgage Payment to Effective Income Ratio, abbreviated as PTI for payment-to-income; you might also see this referred to as your front-end debt ratio. Your PTI can be as high as 40% if your credit score is at least 580.

The debt-to-income ratio, known as DTI, measures the percentage of your pretax income that you spend on monthly debt payments, including your mortgage or rent, credit cards, student loans and other obligations. You can use a debt-to-income ratio calculator to figure out where you stand.

As with PTI, the FHA's guidelines for DTI vary depending on your credit score and other aspects of your financial picture, like how much cash you have on hand. The highest DTI the FHA allows is 50%; that's if your credit score is at least 580 and you meet additional qualifications.

FHA loan income requirements

There is no minimum or maximum salary that will qualify you for or prevent you from getting an FHA-insured mortgage. However, you must:

Have at least two established credit accounts. For example, a credit card and a car loan.

Not have delinquent federal debt or judgments, tax-related or otherwise, or debt associated with past FHA-insured mortgages.

Account for cash gifts that help with the down payment. That can include money from a friend or family member, a charity, your employer or union, or from a government agency. These gifts must be verified in writing, signed and dated by the donor.

FHA loan limits

The property must meet FHA loan limits, which vary by county. In 2023, that’s generally $472,030 for single-family homes in low-cost areas and $1,089,300 in high-cost areas.

FHA documentation requirements

Here is some of the documentation you will need when applying for an FHA home loan:

Valid government-issued ID, like a driver's license or passport.

Proof of a Social Security number.

Up to two years' worth of original pay stubs, W-2 forms or valid tax returns.

Signed and dated letters that detail the source and amount of any gift funds and explicitly state that you don't need to pay back the money.

An FHA-approved lender will walk you through the details of other documentation you might have to provide.

 

 

HAHAHAHAHAHAHAHAHA!!!!!!

Looks like we will need at least a couple more years for all these people to default on their loans and the next president to bail out the banks. 

[RaiderHaters Revenge 4,580]

what could go wrong

[JustinCharge 2,397]

you mean its the savings & loan crisis all over again.  or hell its a wonderful life all over again.

[TimHauck 3,406]

FHA loans were not the reason for the last crash

[Reality 3,134]

Jesus, how the actual fock is that still an option....

[edjr 7,033]

40 minutes ago, TimHauck said:

FHA loans were not the reason for the last crash

People getting loans that couldn't afford them was a big part of it. HTH

Like no income verification.   Good job, good effort. 

 

[TimHauck 3,406]

2 minutes ago, edjr said:

People getting loans that couldn't afford them was a big part of it. HTH

Like no income verification.   Good job, good effort. 

 

FHA loans have income verification.  HTH

[edjr 7,033]

2 minutes ago, TimHauck said:

FHA loans have income verification.  HTH

 

These new FHA rules are really good for the housing market. Good call. 

[Reality 3,134]

14 minutes ago, edjr said:

 

These new FHA rules are really good for the housing market. Good call. 

Putting somebody in a house they can't afford is never a good idea, ever.

[Cloaca du jour 2,157]

When I was house buying...the bank said we are preapproved for 250k lol.  I was like...are you kidding?   I bought a 92k dollar house and live a nice comfortable life and had no issues with kids in college..cars..etc.  just because you can...doesnt mean you should.

[easilyscan 1,065]

7 minutes ago, Cloaca du jour said:

When I was house buying...the bank said we are preapproved for 250k lol.  I was like...are you kidding?   I bought a 92k dollar house and live a nice comfortable life and had no issues with kids in college..cars..etc.  just because you can...doesnt mean you should.

Well done. 

Since the cause of last crash involving housing has been mentioned in the thread, here's the best explanation I've ever seen. 

https://www.backwoodshome.com/the-meltdown-and-the-bailout-why-how-and-what-they-mean/

 

[RaiderHaters Revenge 4,580]

1 hour ago, TimHauck said:

FHA loans were not the reason for the last crash

its not the FHA itself but the new requirements to get it

500 credit score? Zero income qualification?

how about a 1.09 million$ FHA loan available

how do you afford a 1.09 million home and only have the capability of putting down 35 thousand

[TimHauck 3,406]

1 hour ago, edjr said:

 

These new FHA rules are really good for the housing market. Good call. 

Is any of it new other than a higher loan limit?

[TimHauck 3,406]

17 minutes ago, RaiderHaters Revenge said:

its not the FHA itself but the new requirements to get it

500 credit score? Zero income qualification?

how about a 1.09 million$ FHA loan available

how do you afford a 1.09 million home and only have the capability of putting down 35 thousand

There’s not zero income qualification.  There’s just no minimum or maximum to be allowed to get an FHA loan (unlike USDA loans for example), you still have to prove you meet the required DTI ratio

[RaiderHaters Revenge 4,580]

25 minutes ago, TimHauck said:

There’s not zero income qualification.  There’s just no minimum or maximum to be allowed to get an FHA loan (unlike USDA loans for example), you still have to prove you meet the required DTI ratio

ok I misread that then, so lets say I have a car payment, 200$ and thats my only debt, I make 3k a month they will qualify me for how much of a loan? 2500?  I am good on the DTI

the rest is cool though

FHA loan income requirements

There is no minimum or maximum salary that will qualify you for or prevent you from getting an FHA-insured mortgage. However, you must:

• Have at least two established credit accounts. For example, a credit card and a car loan.

• Not have delinquent federal debt or judgments, tax-related or otherwise, or debt associated with past FHA-insured mortgages.

• Account for cash gifts that help with the down payment. That can include money from a friend or family member, a charity, your employer or union, or from a government agency. These gifts must be verified in writing, signed and dated by the donor.

  it doesn't say anything about qualifying?

   

[JustinCharge 2,397]

3 hours ago, TimHauck said:

FHA loans were not the reason for the last crash

idiot.  crashes are emotional driven events.  if the public believes a housing crisis is cause to sell all of their stocks, that's all that is required.  in other words, panic over how FHA loans are set up absoutely can cause a crash.  

[TimHauck 3,406]

7 hours ago, RaiderHaters Revenge said:

ok I misread that then, so lets say I have a car payment, 200$ and thats my only debt, I make 3k a month they will qualify me for how much of a loan? 2500?  I am good on the DTI

the rest is cool though

FHA loan income requirements

There is no minimum or maximum salary that will qualify you for or prevent you from getting an FHA-insured mortgage. However, you must:

• Have at least two established credit accounts. For example, a credit card and a car loan.

• Not have delinquent federal debt or judgments, tax-related or otherwise, or debt associated with past FHA-insured mortgages.

• Account for cash gifts that help with the down payment. That can include money from a friend or family member, a charity, your employer or union, or from a government agency. These gifts must be verified in writing, signed and dated by the donor.

  it doesn't say anything about qualifying?

   

It’s 2 paragraphs down from what you copied:

FHA documentation requirements

Here is some of the documentation you will need when applying for an FHA home loan:

• Valid government-issued ID, like a driver's license or passport.

• Proof of a Social Security number.

• Up to two years' worth of original pay stubs, W-2 forms or valid tax returns.

• Signed and dated letters that detail the source and amount of any gift funds and explicitly state that you don't need to pay back the money.

[TimHauck 3,406]

7 hours ago, JustinCharge said:

idiot.  crashes are emotional driven events.  if the public believes a housing crisis is cause to sell all of their stocks, that's all that is required.  in other words, panic over how FHA loans are set up absoutely can cause a crash.  

My point is “how FHA loans are set up” hasn’t changed in years.  All that’s changing is the amount of loan an FHA borrower can get, which is apparently required by law based on median prices: https://www.hud.gov/press/press_releases_media_advisories/HUD_No_22_244.  I don’t see that anything else is changing but feel free to correct me if I’m wrong. 
 

You can argue that the requirements should be more strict, but I don’t think you can argue that a program that’s been in place since the last crash can be the cause of the next crash.

[TimHauck 3,406]

8 hours ago, easilyscan said:

Well done. 

Since the cause of last crash involving housing has been mentioned in the thread, here's the best explanation I've ever seen. 

https://www.backwoodshome.com/the-meltdown-and-the-bailout-why-how-and-what-they-mean/

 

Yes thank you for proving my point.  FHA loans are not subprime mortgages.  Some called them “the new subprime,” like in this article way back in 2010, but that’s because you couldn’t get true subprime mortgages anymore - https://www.thestreet.com/opinion/fha-loans-the-new-subprime-10754525#:~:text=FHA Gravy and The Threat to Taxpayers Now,of Toronto-Dominion Bank (TD) - Get Free Report

But there have always been lower downpayment options.  You can get a conventional loan with 5% down.  I have heard there were some riskier types of mortgages that started being given out again in the past few years, but FHA loans have been around for a long time.  I can’t find a recent number but according to this article they accounted for about 30% of all loans.   
 

Again, you could argue the requirements should be more strict, but they’ve been this way for years, so headlines like “2006 all over again!” are just fear-mongering.  @edjr has been watching too many “Real Estate mindset” videos on YouTube.  In 2006 people couldn’t afford their loans simply because of things like balloon payments or they could never afford them to begin with.  FHA buyers can afford their loans, it’s just that they often don’t have much wiggle room in case of job loss, etc. So like I said in Ed’s other fear-mongering thread, he likely won’t see the home price depreciation he’s been begging for until we see significant job losses, and that would happen regardless of the prevalence of FHA loans, but FHA loans may just increase it a bit (however they also have helped in increasing values since 2010/2011).

[TimHauck 3,406]

10 hours ago, RaiderHaters Revenge said:

ok I misread that then, so lets say I have a car payment, 200$ and thats my only debt, I make 3k a month they will qualify me for how much of a loan? 2500?  I am good on the DTI

the rest is cool though

FHA loan income requirements

There is no minimum or maximum salary that will qualify you for or prevent you from getting an FHA-insured mortgage. However, you must:

• Have at least two established credit accounts. For example, a credit card and a car loan.

• Not have delinquent federal debt or judgments, tax-related or otherwise, or debt associated with past FHA-insured mortgages.

• Account for cash gifts that help with the down payment. That can include money from a friend or family member, a charity, your employer or union, or from a government agency. These gifts must be verified in writing, signed and dated by the donor.

  it doesn't say anything about qualifying?

   

It says the highest DTI possible is 50% if you “meet additional qualifications.”  

So if you make $3k a month and have a $200 car payment, the max payment you’d be approved for is $1400.

Another reminder that math is not your strong suit.

[TimHauck 3,406]

Keep in mind @edjr that the DTI requirements of course include the interest rate.  So while loan limits have increased, that basically just means that FHA loans could be an option for people buying more expensive homes.  But on an individual basis, if someone is getting approved for an FHA loan, the amount of house they can buy is still going to be less than last year due to the higher interest rates.

[edjr 7,033]

19 minutes ago, TimHauck said:

Keep in mind @edjr that the DTI requirements of course include the interest rate.  So while loan limits have increased, that basically just means that FHA loans could be an option for people buying more expensive homes.  But on an individual basis, if someone is getting approved for an FHA loan, the amount of house they can buy is still going to be less than last year due to the higher interest rates.

You know and I know, this if for poor people to buy houses they can't afford. 

[TimHauck 3,406]

5 minutes ago, edjr said:

You know and I know, this if for poor people to buy houses they can't afford. 

Well I’d disagree with saying they can’t afford them, and I guess you’re also calling many first time homebuyers “poor people,” but regardless it has been that way since 1934, your OP seems to be implying this is a new development.

[TimHauck 3,406]

If it wasn’t for FHA loans, the recovery from the last crash would have taken much longer.

[RaiderHaters Revenge 4,580]

2 hours ago, TimHauck said:

It says the highest DTI possible is 50% if you “meet additional qualifications.”  

So if you make $3k a month and have a $200 car payment, the max payment you’d be approved for is $1400.

Another reminder that math is not your strong suit.

has nothing to do with math d1ckhead, I was asking a question I didnt understand what it meant is all

 

[dogcows 1,225]

Are people really stupid enough to blame the 2008 housing crisis on FHA loans and not on the banks with over-leveraged mortgage-backed securities? You are blaming middle income fellow Americans who want to own a home for the scam perpetrated by billionaire bankers? Dear Lord...

Wealthy bankers screwed millions of people out of their homes, and then got bailed out. And you want to absolve them of responsibility? Why don’t you just send all your money directly to billionaires, and sign your house over to them too? So sad and pathetic to see people getting raped by the rich and blaming their fellow middle class Americans instead.

[TimHauck 3,406]

11 minutes ago, RaiderHaters Revenge said:

has nothing to do with math d1ckhead, I was asking a question I didnt understand what it meant is all

 

Well you’re welcome for informing you then

[RaiderHaters Revenge 4,580]

6 minutes ago, dogcows said:

Are people really stupid enough to blame the 2008 housing crisis on FHA loans and not on the banks with over-leveraged mortgage-backed securities? You are blaming middle income fellow Americans who want to own a home for the scam perpetrated by billionaire bankers? Dear Lord...

Wealthy bankers screwed millions of people out of their homes, and then got bailed out. And you want to absolve them of responsibility? Why don’t you just send all your money directly to billionaires, and sign your house over to them too? So sad and pathetic to see people getting raped by the rich and blaming their fellow middle class Americans instead.

was anyone blaming that?

what we are talking about is making it easier for people who should not get home loans able to get home loans they cant afford

 

[TimHauck 3,406]

3 minutes ago, RaiderHaters Revenge said:

was anyone blaming that?

what we are talking about is making it easier for people who should not get home loans able to get home loans they cant afford

 

We’re not making it easier, that’s my point, it’s the same as it’s been.

You already admitted you don’t understand this topic, might be in your best interest to stop posting in it.

[edjr 7,033]

8 minutes ago, RaiderHaters Revenge said:

was anyone blaming that?

what we are talking about is making it easier for people who should not get home loans able to get home loans they cant afford

 

nailed it. 

[TimHauck 3,406]

1 minute ago, edjr said:

nailed it. 

Lol.  The title of your thread about FHA loans includes “2006 all over again”

[RaiderHaters Revenge 4,580]

12 minutes ago, TimHauck said:

Lol.  The title of your thread about FHA loans includes “2006 all over again”

yes, those are two separate things though

FHA loans, is setting up a similar possibility to 2006 all over again

 

[TimHauck 3,406]

6 minutes ago, RaiderHaters Revenge said:

yes, those are two separate things though

FHA loans, is setting up a similar possibility to 2006 all over again

 

So you are blaming them at least in part for the last crash then, got it

[edjr 7,033]

18 minutes ago, RaiderHaters Revenge said:

yes, those are two separate things though

FHA loans, is setting up a similar possibility to 2006 all over again

 

Correct. This new set of rules if going to not end well for most people who take advantage of them. Smart people with smart money do not need FHA

[dogcows 1,225]

22 minutes ago, RaiderHaters Revenge said:

yes, those are two separate things though

FHA loans, is setting up a similar possibility to 2006 all over again

 

Yeah, but the crash wasn’t caused by FHA loans. Just stop.

I know the GOP narrative is that government is always bad. But in the 2008 case, the lack of regulation on mortgage-backed securities was the problem. Pretending otherwise? Just setting yourself up to get punked by Wall Street again.

Continuing to blame poor people for a crisis caused by billionaires (who then got bailed out with the tax money of poor people) is just idiotic.

[RaiderHaters Revenge 4,580]

14 minutes ago, TimHauck said:

So you are blaming them at least in part for the last crash then, got it

jeezus, sometimes you are too dense

I am blaming the fact that people who can't afford loans can get them easier

the FHA new policy is setting up similar situation for the ARM loan situation of 2006

also the FHA has always had 3% down which is what set up ARMs

[RaiderHaters Revenge 4,580]

1 minute ago, dogcows said:

Yeah, but the crash wasn’t caused by FHA loans. Just stop.

I know the GOP narrative is that government is always bad. But in the 2008 case, the lack of regulation on mortgage-backed securities was the problem. Pretending otherwise? Just setting yourself up to get punked by Wall Street again.

Continuing to blame poor people for a crisis caused by billionaires is just idiotic.

where am I doing that?

you do understand that FHA loans are what allowed ARMs to exist in the first place, being able to get essentially a 17% adjustable second buying a house with nothing down was part of the problem

and of course once again, I am against govt, against billionaires etc etc

 

[TimHauck 3,406]

23 minutes ago, edjr said:

new set of rules

I don’t think you know what this phrase means

[TimHauck 3,406]

29 minutes ago, RaiderHaters Revenge said:

jeezus, sometimes you are too dense

I am blaming the fact that people who can't afford loans can get them easier

the FHA new policy is setting up similar situation for the ARM loan situation of 2006

also the FHA has always had 3% down which is what set up ARMs

Easier than what?  What new policy?  The “set of rules” hasn’t changed, that’s been my point all along, seems you and Ed are the dense ones. 

Do you have a link for FHA loans “setting up” ARM’s?  

[dogcows 1,225]

40 minutes ago, RaiderHaters Revenge said:

where am I doing that?

you do understand that FHA loans are what allowed ARMs to exist in the first place, being able to get essentially a 17% adjustable second buying a house with nothing down was part of the problem

and of course once again, I am against govt, against billionaires etc etc

 

You just don’t seem to understand what really happened in 2008.

Subprime lending, which was intentionally ignoring negative information about borrowers, then bundling those bad loans together and selling shares of them to unwitting investors is what caused the problem. When a few people defaulted, the banks didn’t care because they got the house and could re-sell it. But when a lot of people defaulted, the banks now had houses that were worth far less than what they loaned the person, so now the bank is underwater on thousands of mortgages. Then that crash affected people who COULD afford their home, because now they owed way more on the house than it was worth. So they had to take a serious look at whether they should just default and let the bank have the house back... and many decided to just let the homes go.

If you blame the FHA for this, you just don’t get it. It was the greed of Wall St. wanting to keep growing in this market, and ignoring the fact that it was saturated... then loaning to people who definitely couldn’t afford the loans they were being given. Lying about the risk when selling mortgage-backed securities to unwitting investors was just the cherry on top of this shite Sunday.

Not everything is the government’s fault. The ’08 crisis was definitely the fault of greedy banks more than any other factor.