FHA lending standards can help people who otherwise wouldn't qualify to find a home loan.
The FHA, or Federal Housing Administration, backs home mortgages to encourage lenders to issue mortgages to people who can only afford small down payments. These loans are attractive for many borrowers because they are offered with less rigid credit requirements.
Credit History
FHA loans recommend a minimum credit score of 620, which usually means two or fewer accounts that are late by no more than 30 days. If you do not have credit history, you must be able to show your creditworthiness by providing records of paid utility bills or rent.
Bankruptcy and Foreclosure
You cannot qualify for an FHA loan if you had a bankruptcy in the prior two years or a foreclosure in the prior three years.
Tax Liens
State tax liens must be paid in full before you are eligible for an FHA loan. Federal liens do not have to be paid, but you must show that you are able to pay the lien's monthly payment and the mortgage monthly payment in order to be approved.
Employment
You must be able to show steady employment over the past two years with either consistent or increasing income.
Down Payment
Unlike conventional mortgages that require between 10 and 20 percent of the selling price as a down payment, FHA-backed loans can have down payments as low as 3.5 percent.
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