FHA Down Payment Requirement
The down payment amount requirement for an FHA loan is tied to your FICO credit score. If you’d like to only put down 3.5%
16, you’ll need a minimum credit score of 580. For borrowers with credit scores from 500 to 579, they’ll need to put down 10% of the home’s purchase price.
FHA Debt-to-Income Ratio Guideline
FHA lenders consider two different ratios before issuing a loan. The first one is the payment-to-income ratio (PTI), or front-end debt ratio, which is your proposed monthly mortgage payments to your monthly income.
The second ratio is debt-to-income (DTI), which is your net income spend on monthly debt payments (rent, current mortgage, credit cards, loans, etc.). Our
debt-to-income ratio worksheet can help you calculate yours.
The FHA requires borrowers to have a DTI that doesn’t exceed 50% and a PTI that’s no higher than 40%.
FHA Loan Income Requirements
Borrowers don’t need to meet a minimum monthly income requirement to qualify for an FHA loan, and there’s no maximum salary that will disqualify them either. However, you will need to show that you have a sufficient, steady income, which assures lenders that you can afford the loan.
FHA Mortgage Insurance Requirement
With an FHA loan, you’ll be required to pay an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (AMIP). These charges reduce loss for lenders if the borrower defaults on the loan. You can pay the UFMIP all at once in cash at closing time, or you can have it financed into the loan amount. The UFMIP is a one-time payment that is 1.75% of the base loan amount, and it’s non-refundable.
Your AMIP amount is calculated annually, but borrowers pay it monthly on top of the loan payment. The AMIP amount varies based on the FHA loan term, loan amount, and your current loan-to-value (LTV) ratio. If you put down less than 10% for your FHA loan, you’ll need to pay the AMIP for the life of the loan (unless you convert the FHA loan into a conventional loan). If you put down 10% or more, you’ll only need to pay the AMIP for 11 years.
FHA Closing Costs
When financing an FHA home loan, it’s important to budget for closing costs and fees, which are the expenses you pay to complete a real estate transaction. These cost amounts will vary by state, lender, and vendors. Some closing costs are specific only to FHA loans. In Florida, the average closing cost fee is between 2.05% and 2.75% of the total purchase price.
Here’s a checklist of common closing costs:
- Lender’s origination fee: This is usually 0.5% to 1% of the loan amount that lenders sometimes charge as compensation for loan processing and other fees.
- Underwriting fee: Many lenders, but not all, will charge an underwriting fee to cover the cost of evaluating the loan application. This may be in lieu of or in addition to an origination fee. The average cost is between $400 and $900.
- Document preparation fee: This fee is usually around $50-$100 and covers the cost for managing loan paperwork and documents.
- Appraisal fee: This is what you pay for the appraiser to estimate a home’s market value. It’s typically between $300 and $500. The lender will require an FHA-approved professional appraiser.
- Home inspection: The FHA does not require a home inspection, but it’s important for buyers to get one to identify the home’s problems (and if it’s worth buying). The typical cost of a home inspection is around $300. You may also need a separate inspection for a septic tank if your home has one.
- Homeowner's insurance: This amount will vary based on the home and location (from $800 to $2,500 a year), but with most FHA loans, you’ll need to pay this in advance before closing.
- Property survey: This will identify the property’s boundaries, any new structures or additions too close to a property line, and any neighboring items that encroach on the property (about $500). You can also see if the home has an existing property survey at your town hall (which may work if the home hasn’t had any property changes since then).
- Title search and insurance fees: These are often quite the lion’s share of closing costs, as they’re often between $1,000 to $1,200 to cover the cost of having a title company do research on any liens against the property, and along with title insurance, this protects you against any lien claims or future deeds against your property.
- FHA Upfront Mortgage Insurance Premium (UPMIP): As previously mentioned, this is 1.75% of the loan amount.
Other possible closing costs: credit report fee, application fee, discount fee, attorney fee, tax service fee, recording fee, wire transfer fee, pre-paid property tax, tax escrows, notary fee, courier fee, and flood certification fee.
Helpful Tip: Be sure to ask the lender if they can waive or lower any of these fees. You can also try to negotiate with the seller to pay for some of them (or a percentage of them), use a gift of cash from a friend or family member, or roll some of the costs into your loan.
FHA Required Documents
You’ll also need the following to apply for an FHA loan:
1) Minimum of two established credit accounts (for example, loans or credit cards) and not have any delinquent federal debt, judgements, or past FHA insured mortgage debts
2) Valid government-issued ID, such as a driver’s license or passport
3) Proof of a Social Security number
4) Up to two years’ worth of original pay stubs, W-2 forms, or valid tax returns
See our
Home Buying Center for more helpful checklists and worksheets. There you can also learn more about what you need before
applying for an FHA loan.
How to Apply for an FHA Loan | Space Coast Credit Union
Feel free to
get in touch with us to review your specific home loan needs and discuss your options. You’re also welcome to
request more info here. At SCCU, we offer FHA loans with terms up to 30 years and competitive interest rates. Plus, we don’t charge any application fees. You can easily apply for an FHA loan online or at a branch.