FHA Loans: The Current Purchase And Refinance Loan Requirements

FHA loans are available for you if you have a credit score of 580 or higher. It gives you the option to make a down payment as low as 3.5%. This makes FHA loans stand out as more accessible compared to other mortgages.
"Who Are FHA Loans Best For?"

FHA home loans are a great option for people whose credit scores are 580 and higher, and who have at least a 3.5% down payment. 

These more friendly financial qualifications make FHA loans a popular option if you’re a first-time home buyer*.

*You don’t need to be a first-time buyer to qualify for an FHA loan.

"How Do FHA Loans Work?"

FHA mortgages are insured by the Federal Housing Administration (FHA).

The FHA protects lenders against defaults on payments. This makes it easier for you to qualify and allows lenders to offer lower interest rates.

"What Are The Exact Qualifications?"
  • A down payment on the home of at least 3.5%.
  • A FICO® Score of 580 (or better).
  • A DTI, or debt-to-income ratio, equal to or lower than 50%*. You also need a steady history of employment. 
  • Cash to cover the UFMIP, or upfront mortgage insurance premium. This amount will usually be equal to 1.75% of the loan amount.
  • Enough cash to cover the costs for closing, at around 2 – 6% of the total purchase price.
*You can calculate your DTI by:
1. Adding up monthly debt payments (for example credit card and/or car payments).
2. Divide the total amount by your monthly income before taxes. You need that number to be under 50% to qualify for the FHA loan.
FHA Mortgage Rates
Product
Rate
APR
FHA 30 Year Fixed
FHA 25 Year Fixed
FHA 15 Year Fixed
3 Disclaimers and Examples

For a 30-year FHA Fixed-Rate Loan:

The following is calculated based on an interest rate of 3.625%, with a 4.628% APR (annual percentage rate) and the cost of 2.125 Points, for a total of $4,324.38 paid at closing. On a mortgage of $203,500, you would have to pay monthly payments of exactly $1,060.26.

The monthly payment in this example doesn’t include insurance premiums and taxes, meaning the total payment amount would be higher. This payment amount also assumes that the LTV, or loan-to-value, is at 74.91%.

The monthly home loan payment includes an upfront mortgage insurance premium paid once, set at 1.75% of your base loan amount, plus a MIP, or a monthly mortgage insurance premium, calculated at 0.8% of your base loan amount. 

For home loans with a loan-to-value, or LTV, ratio of 74.91%, your 0.8% monthly MIP will have to be paid during the first 11 years of your term. After that, your monthly mortgage payment will consist of two equal parts: the monthly principal and the interest payments until the end of your loan.

For a 25-year FHA Fixed-Rate Loan:

The following is calculated based on an interest rate of 3.625%, with a 4.755% APR (annual percentage rate) and the cost of 2.125 Points, for a total of $4,324.38 paid at closing. On a mortgage of $203,500, you would have to pay monthly payments of exactly $1,164.28.

The monthly payment in this example doesn’t include insurance premiums and taxes, meaning the total payment amount would be higher. This payment amount also assumes that the LTV, or loan-to-value, is at 74.91%.

The monthly home loan payment includes an upfront mortgage insurance premium paid once, set at 1.75% of your base loan amount, plus a MIP, or a monthly mortgage insurance premium, calculated at 0.8% of your base loan amount. 

For home loans with a loan-to-value, or LTV, ratio of 74.91%, your 0.8% monthly MIP will have to be paid during the first 11 years of your term. After that, your monthly mortgage payment will consist of two equal parts: the monthly principal and the interest payments until the end of your loan.

For a 15-year FHA Fixed-Rate Loan:

The following is calculated based on an interest rate of 3.375%, with a 4.581% APR (annual percentage rate) and the cost of 2.00 Points, for a total of $4,070.00 paid at closing. On a mortgage of $203,500, you would have to pay monthly payments of exactly $1,515.55.

The monthly payment in this example doesn’t include insurance premiums and taxes, meaning the total payment amount would be higher. This payment amount also assumes that the LTV, or loan-to-value, is at 74.91%.

The monthly home loan payment includes an upfront mortgage insurance premium paid once, set at 1.75% of your base loan amount, plus a MIP, or a monthly mortgage insurance premium, calculated at 0.45% of your base loan amount. 

For home loans with a loan-to-value, or LTV, ratio of 74.91%, your 0.45% monthly MIP will have to be paid during the first 11 years of your term. After that, your monthly mortgage payment will consist of two equal parts: the monthly principal and the interest payments until the end of your loan.

FHA Loan Benefits
  • Lower credit score requirements compared to other mortgage types.
  • If you’ve had financial issues such as bankrupcy in the past, you could still qualify.
  • Available with both adjustable and fixed rates, with 15- or 30-year terms.
  • Low requirements for down payments. You could put down as little as 3.5%.

There are other great benefits, too:

  • The borrower can roll his/her closing costs into the loan.
  • Have you already got an FHA loan? If so, you’ll be able to refinance it with what’s known as an FHA Streamline. It’s a great alternative if you’re looking to take cash out. Less documentation is required here, and you might not need an appraisal, saving you time and hassle.
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FHA Property Requirements
  • Your loan may not exceed the limits in your area as established by the Federal Housing Administration. The limit on low-cost areas is currently set at $420,680. The limit in high-cost areas is right now set at $970,800. Take the time to look up any loan limits in your area.
  • Your home has to meet the minimum property standards of the FHA (for what they call safety, security, and structural integrity).
  • You’ll need to move in within 60 days after closing after you’ve bought the home.
  • The property you’re buying must be your primary residence. This means that second homes and investment properties do not qualify for FHA loans.
Take your first home loan step with Crown Mortgage of the West.

Call us now to get personalized recommendations about FHA mortgages, or to discuss different options.

Why You Should Choose Crown Mortgage of the West
  • You’ll get access to an online application process, which saves you paperwork.
  • Our Home Loan Experts will be there to answer questions and concerns, and to help you get clear on all the details so you get the perfect mortgage for your needs.
  • After you’ve closed the home loan, you’ll be able to manage your mortgage online without any hidden fees.
  • You can expect customer service long after you’ve closed. You see, we service around 99% of all our mortgages.
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Other Mortgage Options

Keep the following in mind:

  • Mortgage rates are in constant flux.
  • Your actual mortgage payments will vary. This is based on your individual situation as well as current rates.
  • Certain products may not be available in every state.
  • Certain jumbo products are unavailable to first-time homebuyers.
  • Lending services are unavailable in some areas.
  • Certain restrictions could apply based on your location and situation.
  • Unless stated otherwise, we assume a refinance or purchase of a primary residence without a cash-out at closing.
  • Unless stated otherwise, we’ve assumed the following: all costs associated with closing are paid out of your pocket; it’s your primary residence and it’s a single-family home; your debt-to-income ratio (DTI) doesn’t exceed 30%; your credit score is greater than 720 (for certain jumbo products, we assume a credit score of 740 or higher.
  • You have a 40-day lock period for your mortgage rate.
  • If LTV > 80%, PMI will be added to your monthly mortgage payment, with the exception of Military/VA loans (these loans don’t require PMI).
  • Keep in mind that we don’t have all the necessary information to make an accurate assessment if you don’t contact us. At Crown Mortgage of the West, we offer a wide selection of home loan options. Do you want more precise and personalized results? Call us at (805) 434-5226 right now, and speak to one of our mortgage experts.

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