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An FHA loan is insured against default by the Federal Housing Administration (FHA). FHA loans help buyers with less than perfect credit purchase homes.


FHA Loan Requirements

Ø  Minimum credit score of 580

Ø  Down payment of 3.5% of purchase price.  (Down payment can be a gift from a family member.)

Ø  With a 10% down payment lenders may consider credit scores of 500-579  

Ø  Total mortgage payment must be less than 31% of gross income.  The total payment includes mortgage payment, escrow payments for property taxes, homeowner’s insurance and            mortgage insurance.

Ø  Must have monthly debt payments of less than 43% of gross income.  This includes the mortgage payment, car payments, student loans, credit cards and any other debt.

Ø  Two years or more since bankruptcy.

Ø  Three years or more since foreclosure.

Ø  The property must pass an FHA inspection.

Ø  An up-front mortgage insurance payment of 1.75% of the loan amount that can be added to the loan. (For a $150,000 loan $2,625)

Ø  Monthly mortgage insurance until the home’s value is greater than 80% of the mortgage balance.

Follow this link to an easy to use FHA payment calculator.

Mortgage Credit Certificate (MCC) program

This program may be used with any 30-year, fixed-rate mortgage. It gives a federal tax credit based on interest paid each year.

Requirements for a Mortgage Credit Certificate

Ø  Be a first-time home buyer (or have not owned a home in the last three years)

Ø  Must buy a new or existing home. Refinancing does not qualify

Ø  Must buy a home in Alabama and occupy it as your primary residence.

Ø  Must meet federally established income and sales price limits

Ø  Must have a 30-year loan.

Most lenders require a credit score of 560 – 580 or higher.

Get a free copy of your credit report


This information is a summary only and not to be used to make financial decisions. Contact an experienced local lender for full and current information.


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