First-Time Home Buyer FHA Loan

Getting the money to buy your first home can be a challenge. Find out how to qualify and submit an application for a first-time buyers FHA loan.

It can be hard to get the financing in place to purchase your first home. The Federal Housing Administration, or FHA knows this too! They have a solution that will make the entire process much easier for first-time buyers. Find out all about qualifying and applying for an FHA loan.

Is an FHA loan right for you?

The Federal Housing Administration insures some types of loans that are made through a traditional mortgage lender. These types of loans are referred to as FHA loans. These loans are backed by the government to help more people attain the goal of home ownership. Mortgage lenders are less strict about who they lend to with FHA loans than a conventional loan This allows people with lower incomes and lower down payments to qualify for a mortgage. But FHA loans do have certain restrictions on how they can be used.

How to Qualify for a First-Time FHA Loan

FHA first-time buyer loans are more forgiving of less than stellar credit and debt issues than a conventional home mortgage would be.

Down Payment

Conventional mortgages require 5%-20% down payment. Which can be hard for people to save up. A FHA loan on the other hand requires only a 3.5% down payment to qualify.

Credit History

To qualify for an FHA loan you will need at least two lines of credit. Your credit must also show a pattern of good payment history. This is excluding isolated periods of financial crisis like a bankruptcy.


Some minor debt will not disqualify you from being approved for the loan. But if you have delinquent federal debts, like unpaid student loans.

Debt-to-Income Ratio

One main thing your lender will look at is your Debt-to-income ratio. This is the amount of overall debt you will have after purchasing your home. The FHA has set boundaries for this amount. The FHA allows your mortgage to max out at 31%. This is your monthly mortgage payment divided by your total monthly income. Your overall max is 43%. This is the total of your mortgage and all of your recurring debts combined divided by your monthly income.

All FHA Loans require you to pay a one-time mortgage insurance payment, which is 1.75% of the base loan amount, in addition to recurring monthly mortgage insurance payments. Remember to factor this into your calculations!

Mortgage insurance is required on all FHA backed loans. This is a one-time payment of 1.75% of the loan amount in addition to monthly mortgage insurance payments. Don’t forget to include this in your budgeting!

What is mortgage insurance? It is a required part of your monthly loan payment. In exchange for the lowered down payment requirements with an FHA loan, you are required to have mortgage insurance. This consists of two insurance payments. There is an up font fee that is typically paid at the closing. In addition to this, you will have a monthly mortgage insurance payment until you pay down approximately 20% of the loan.


Having a bankruptcy on your record won’t disqualify you automatically from qualifying for a first-time home buyers loan. With a chapter 13 bankruptcy you can qualify if you can explain your financial situation, pay off your bankruptcy for one year, show your job stability, and get a letter of approval from the court. If you filed a Chapter 7 bankruptcy, you will have to explain your financial situation, have your bankruptcy payed off for two years, and can prove job stability.

How to Apply for a First-Time FHA Loan

Once have found the FHA-qualified home for you, it’s time to apply for your loan!

1. Find an FHA-approved lender.

Not every lender is insured to offer FHA loans. To be able to get a first-time buyer loan you will have to find an FHA-approved lender. If you don’t know a great lender, your Bellanor Realty Group agent can recommend a fe great lenders to check out

2. Provide the necessary documents.

In order to apply, you will need to give your lender the following documents:

  • SSN
  • Credit report (Your lender will pull this but you should know whats on it ahead of time)
  • Your address from the past two years
  • Pay stubs and W-2’s from the past two years
  • Names and addresses of your employers from the past two years
  • Personal tax returns from the past two years
  • Gross monthly income(before taxes)
  • Bank account information
  • Any open loan information (like car payments, student loans etc.)
  • Approximate value of all personal property
  • Property purchase agreement
  • Certificate of Eligibility and DD-214 (if a veteran)
  • Current income statement and business balance sheet (if self-employed)

3. Provide a down-payment.

You will have to have 3.5% of the home price, at a minimum, for a down payment at closing.

Using an FHA Loan

FHA backed loans have restrictions on how much you can borrow, as well as the type of home you can buy. These loans can sometimes have an effect on how a seller will view your offer as well. These are important things to keep in mind and discuss with your real estate agent as well.

Lending Limits

The FHA lending limits will vary from place to place, because they take into account the home price variations across markets. You can check out the FHA Loan Guidelines on the Federal Housing Administration’s website to see what the lending limits are for you area.

Home Standards

The FHA wants to insure that they are making a good investment when they back your loan, so they have specific guidelines that a home must meet when it comes to health and safety requirements. These standards will limit the homes that you can look at in your search, sometimes more than your think. Ask your Bellanor Realty Group agent for more information on why some homes may not qualify for these types of loan programs.

Seller Perceptions

Depending on your area and the type of market you are in, a FHA loan can be viewed by sellers as a less desirable option if they have multiple offers. FHA loans come with strings attached and some sellers may not be able to make a home qualify for these types of loans if there are certain issues with the house. If you are in a competitive market, they might put you in a disadvantage, talk to your Bellanor Realty Group agent to come up with the best strategy for you.