The purpose of FHA loans is to promote home ownership by allowing for lower down payments, lower closing costs, and easier credit qualifying. The requirements to qualify for an FHA loan in Ohio are not necessarily different than those in other states, but at the county level there may be some slight differences.
Also, you should understand that the FHA provides “guidelines” to mortgage lenders, but lenders are not bound by many of these guidelines — they can and often do have stricter requirements than those suggested by the FHA.
Key FHA Loan Requirements
There are many details that go into qualifying for an FHA home loan, but here are the key rules and considerations if you choose to obtain an FHA mortgage:
- Primary Residence – The home you are buying must be your primary residence, not a second home or a house that you rent to others without living there yourself. However, the building can be a single family house, a building with 2-4 residences, a condo, or a manufactured home.
- Credit Score – Your credit score must be at least 580 to meet FHA standards, BUT mortgage lenders often have their own standards and a score of at least 640 or 650 is more likely to be the current standard. (If you have a FICO credit score of 500-579 AND a 10% down payment, you also could qualify by FHA standards.)
- Debt Load – In general, your monthly mortgage payment should not be more than 31% of your monthly gross income and your DTI (debt-to-income ratio) should not exceed 43% of monthly gross income. (Gross income is income before taxes.) In other words, if you are seeking a mortgage that has a monthly payment “too big” for your current income and/or “too big” when added to your other monthly debt payments in comparison to your income, the lender may reject your mortgage application.
- Down Payment – You must have a down payment of at least 3.5% of the home’s selling price.
- FHA Loan Limits – The maximum FHA loan varies by county, based on local real estate norms. In most areas of Ohio, the maximum FHA loan for a single-family residence is $356,362, though some areas have a maximum of $397,900. If you are buying a building with more than one residence, the loan limit is higher. You can use HUD’s FHA Mortgage Limits search tool to find the maximum loan amounts for your area of Ohio.
- Mortgage Insurance – FHA loans require mortgage insurance! You’ll pay an upfront mortgage insurance premium as well as an annual insurance premium. (NOTE: If your down payment is less than 10% of the home price, you will be required to pay mortgage insurance for the life of the loan, but if your down payment is over 10%, mortgage insurance is only required for the first 11 years.)
- Income – There is no minimum income required to qualify for an FHA loan. Also, there is not a maximum income that would disqualify you from applying. (However, note that lenders will take your income into consideration, especially as it compares to the size of the mortgage you are seeking.)
- You must have a Social Security number.
- You must be a legal United States resident or have eligibility to work in the U.S.
- You must be of legal age to obtain a mortgage. (This usually means at least 18 years old in Ohio.)
- You can not have had a bankruptcy or foreclosure in the past two years.
- The home you are buying must have its value appraised by an FHA-approved appraiser.
Documents That Lenders Will Want To See From You
- Income verification, with employment records for the past two years. (NOTE: You are not disqualified if you haven’t had two years of steady employment, but lenders may ask why you weren’t employed. They will also want some reassurance that your current employment and income is stable for the foreseeable future.)
- One or more bank statements (covering the last 30 days at a minimum)
- Information on any past mortgages you have held, if any