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FHA Loans & FHA Loan Qualifications

Federally Insured Home Loans with Low Out-of-Pocket Costs

Becoming a homeowner can be a challenge, especially for first-time home buyers and those with limited savings or credit difficulties. Thankfully, because Landmark National Bank is an approved lender with the Federal Housing Administration (FHA), our mortgage specialists can offer low- to-moderate-income borrowers with FHA-insured loans that require lower down payments and credit scores than many types of conventional loans.

How do FHA loans work?

An FHA loan is a home loan that is insured by the Federal Housing Administration. This type of loan allows prospective homeowners with lower credit scores or minimal savings to purchase a home with low out-of-pocket costs. FHA loans can be used to purchase one- to four-unit family dwellings condominiums, or manufactured homes that are proposed, under construction, or existing. Additionally, these loans can be used to refinance an existing FHA or non-FHA loan.

Note: FHA loans feature limits on mortgage amounts based on your county.

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What is the difference between an FHA loan and a conventional mortgage loan?

Because FHA loans are insured by the Federal Housing Administration, lenders can provide home loans to borrowers with low credit scores while offering things like down-payment assistance and low interest rates. Conventional loans  typically require higher credit scores that play a direct role in the interest rate you receive. Consult our Quick Rate Calculator for additional insight.

FHA Loan Requirements in Kansas

To meet the FHA’s minimum qualifications, you can borrow up to 96.5% of home’s value, which means a down payment of 3.5% would be required.  Additionally, you must have a steady employment history or have worked for the same employer for the past two years.

If you qualify, your down payment can come from sources like:

  • Cash or savings and checking account funds
  • Investment funds
  • Gifts from relatives
  • Funds resulting from the sale of personal or real property
  • Loan and grants
  • Employer assistance
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Debt-to-Income Ratio

Your debt-to-income (DTI) ratio also plays an important factor in qualifying for an FHA loan. The Department of Housing and Urban Development (HUD) uses two ratios to determine if a borrower can effectively make the payments required for an FHA loan.

First, your front-end DTI (your monthly gross income divided into the proposed mortgage payment, taxes, insurance, and mortgage insurance premium) should not exceed 31%.

Second, your back-end DTI (your total debt to income ratio, which includes your proposed housing debt plus any additional consumer debt that appears on your credit report) should not exceed 43%. It’s important to note that FHA guidelines allow lenders like Landmark National Bank to accept higher DTI ratios if borrowers are able to meet certain compensating factors.

Have questions about your debt-to-income ratio or compensating factor qualifications for an FHA loan? Reach out to one of Landmark National Bank’s mortgage specialists today to learn more.

FHA Loan Property Requirements

In order to qualify for an FHA loan, your property must meet HUD’s minimum property standards, such as durability, soundness, and safety. Additionally, the FHA requires a home appraisal that’s separate from a home inspection. During this appraisal, an FHA appraiser will ensure the home meets basic safety and livability standards included in HUD’s FHA Single Family Housing Policy Handbook, including things like:

  • A structurally sound foundation.
  • Proper water drainage away from the foundation.
  • Working appliances.
  • Adequate water pressure with hot and cold temperature options.
  • Functional electrical outlets and switches.
  • Windows that open, close, and securely lock.
  • A non-leaking roof, or a roof with two more years of life remaining.
  • And more.
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FHA Loan Mortgage Insurance Premiums

FHA loans require two types of mortgage insurance premiums (MIP), including an upfront MIP (due at the time of closing or it can be rolled back into the loan) and an annual MIP that is charged monthly. Currently, the upfront MIP is equal to 1.75% of the base loan amount. The annual MIP amount varies based on the original loan-to-value ratio (LTV), mortgage term, and mortgage amount.

Frequently Asked Questions

What types of properties can I purchase with an FHA loan?

FHA loans can be used to purchase primary residences, including single-family homes, two- to four-unit properties, condos, and manufactured homes. You cannot use an FHA loan to purchase an investment property, vacation home, or second home.

Who is eligible for an FHA loan?

FHA loans are available to U.S. citizens, permanent residents, and non-permanent resident aliens who meet certain eligibility criteria, including (but not limited to):

  • Steady employment history or worked for the same employer for the past two years
  • Valid Social Security number
  • Legal capacity to take on the loan obligation

If you’re unsure if you meet FHA loan qualifications or have more questions about FHA loan eligibility, feel free to reach out to a member of our mortgage banking team.

Home Loan Tools

Have a Question?

Speak to one of our customer service representatives or contact us today.

Find Out if an FHA Loan is Right For You with Landmark National Bank

With lower minimum credit scores than conventional loans, down payments as low as 3.5%, and higher debt-to-income ratios accepted, FHA loans are a great alternative to conventional loans for first-time home buyers  and those in difficult financial situations. If you’re ready to find out if an FHA loan is right for you, contact a mortgage specialist at Landmark National Bank today. Our team will work closely with you to find a home loan that’s right for your lifestyle.