The Ultimate FHA First Time Home Buyer Loan Guide

Looking to score your first fha loan? Stick around because we’re telling you everything you need to know about getting a fha first time home buyer loan.

The most difficult part of obtaining a mortgage is finding the deposit.

So, it is unsurprising Federal Housing Administration (FHA) loans are popular with first-time buyers.

If you are considering becoming an FHA first time home buyer, read our informative guide.

What Is an FHA Loan?

An FHA loan requires an initial down payment of as little as 3.5%.

So, a first time buyer will be able to put down a small deposit to qualify.

As the mortgage rate is often below-market, more home buyers can now qualify for a loan over another type.

The History of FHA Loans

Becoming an FHA first time home buyer isn’t a new deal.

The FHA loan was first introduced on the back of the Great Depression.

The US government formed the FHA to provide insurance to banks, so they would offer real estate loans.

So, it is one of the most effective ways to boost the property market, whilst helping first time buyers onto the ladder.

The FHA is Not a Lender But an Insurer

Despite its establishment more than 80 years ago, the FHA continue to be an insurer of mortgage loans.

Many budding homeowners may fail to realize that the FHA is a mortgage insurer. The agency is not a mortgage lender.

What does this mean for potential FHA first time home buyers? Well, it can result in you receiving an FHA-insured loan from almost any mortgage lender.

So, you do not need to contact the FHA for a loan. You must approach a mortgage lender to discuss the loan type.

In simple terms, you will receive a loan from a mortgage lender that’s insured by the FHA.

Click here to find the best mortgage lender for your needs.

What You Need to Qualify for an FHA Loan

You might be happy to learn that it isn’t too difficult to qualify for an FHA loan with a below average credit score.

As well as a 3.5% deposit, you will only qualify for a loan if you have a credit score of 580 or more.

Other loan programs will often need at least a credit score of 620 or more.

So, if you are a home buyer with a lower credit score, an FHA loan can often be your best route to the property ladder.

A Gifted Down-payment

Do you not have the money for an FHA loan down payment?

Well, you can apply for an FHA loan without having the finances in your own bank account.

The agency allows loved ones to pay for the FHA loan on your behalf.

All they need to do is provide the documentation that they were able to fund the down-payment.

A Forgiving Loan Program

You might think an insurance agency might be less willing to back a home buyer with a poor financial history.

Well, you’re wrong.

Are you worried about a previous bankruptcy? Don’t. You can receive an FHA loan for two years after the discharge date.

For other loan types, a home buyer would have to wait at least 7 years before they would receive approval for a loan.

So, it’s a great way to get back on your feet following financial trouble.

Are you concerned late payments in a close time-frame will affect your qualification? Don’t worry.

The agency can often overlook the issue if you have had a good payment history following the late fees.

Unfortunately, you will not qualify to become an FHA first time home buyer if you have:

  • Defaulted on your student loans
  • Had federal liens (tax liens)

FHA loan rates change daily and vary depending on your unique situation. Get your FREE customized quote here!

Lower Interest Rates for an FHA First Time Home Buyerfha first time home buyer image

Another reason to become an FHA first time homebuyer is that it offers competitive rates.

As a result, you will only have to pay a low mortgage fee each month.

What’s more, the low interest rate will also ensure you pay less over the loan’s lifetime.

The mortgage rates are often 12.5 basis points or more below the traditional 30-year fixed mortgage rates.

For FHA first time home buyers with a below average credit score, they may receive a quote for 100 basis points.

So, the FHA can be a great alternative to a conventional 30-year fixed mortgage loan.

The FHA’s Insurance Policy

If an FHA first time home buyer is unable to pay for the mortgage loan, the bank will not take a loss.

The FHA’s insurance policy means the agency will pay the bank for the loss.

As a result, the banks have nothing to lose and everything to gain, so they are willing to make aggressive loans.

For this reason, budding buyers are more likely to secure an FHA loan with their desired lender.

What You Will Need to Apply for a Loan

You can apply for a loan like you would with any other mortgage type.

The first step is to provide a mortgage lender with an application.

The lender will then request documentation to support your provided information.

The documentation can be:

  • W-2s
  • Federal tax returns
  • Pay stubs
  • Bank statements
  • Proof of employment

If you are a wage-earner, you will often need to provide W-2s for the last two years.

If you have switched jobs in the two-year time-frame, a lender will need proof of a two year work history.

You also do not have to worry about providing proof that you are a first time buyer. An FHA loan is available to everyone.

A lender will ask for confirmation that the property will be your primary home.

It is important to note that you cannot use an FHA loan for second homes, investment units or vacation homes. It is available for primary properties only.

You also cannot apply if you have already received an FHA loan.

A lender will review your supporting documentation against the FHA guidelines.

The guideline’s standards will ultimately determine your eligibility to receive an FHA loan.

If you meet the minimum requirements, the loan will receive approval and funded.

FREE FHA Home Purchase Qualifier

With a FHA loan you could purchase a home for as little as 3.5% down!

The Debt-to-Income Ratio

The FHA understand that finances are not black and white.

While you may not have a flourishing income now, they realize there is still time to grow your income.

For instance, you might be months away from paying off a credit card debt, student loan or car loan.

You might also expect a good pay rise in the next few months.

So, you could still qualify. The FHA has a debt-to-income ratio.

So, if you believe you can afford the repayment, the agency will allow a 50% debt-to-income ratio.

They do so by adding up your total debt, comparing it to the proposed mortgage payment.

They will then divide the amount by your monthly income to receive a percentage.

If you meet the percentage, they will approve your loan.

A Built-In Home Construction Loan

Do you want to secure a mortgage but don’t have the capital to fund property updates?

You will be glad to know there is an FHA loan that can make your dream a reality.

The agency understands that not every property will be ready to move into right away.

For this reason, you can receive an FHA 230K loan for renovations and home improvements.

So, the cost of the home and its improvements will feature in the cost of the mortgage.


It doesn’t matter if you have a little money in the bank, a low credit score or a poor financial history. You could still be eligible to receive an FHA loan.

All you need is at least a 3.5% down-payment, supporting documentation and a credit score of 580 or more.

A loved one can even fund your down payment if you don’t have the money in your bank.

So, if you are a first time buyer looking for an affordable way to enter the property market, consider an FHA loan for an improved mortgage experience.

Not only can you receive a low interest rate, but you could combine home improvements into a mortgage.

You can guarantee all the paperwork will be worth it once you receive the keys to your new home.

Have you become an FHA first time home buyer? Feel free to write your story and tips in the comment section below. We’d love to hear from you.

FHA loan rates change daily and vary depending on your unique situation. Get your FREE customized quote here!


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