FHA loans are not actually granted by the Federal Housing Authority. Instead they are insuring home loans using the federal government's money. Private lenders grant loans to borrowers which the FHA acts some sort of guarantor just in case the borrowers failed to pay the loan.
Most of the time, it is the Americans coming from the lower income brackets that can obtain FHA loans. This had been the main purpose as to why the FHA was created during the height of the Great Depression in the 1930s: to grant loans to these people at very affordable rates. That is why there are certain FHA loan restriction to screen the applicants.
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But despite the restrictions, almost everyone could get a loan. But they are specifically given to the borrowers coming from the lower income brackets. But of course for you to be eligible, you need to follow these guidelines in getting your loan. The checklist below may help you in determining if you can obtain one.
1. It is not a major requirement (because they allow unemployment claims as a down payment for your loans!) but one of the FHA restriction is that you should be able to show at least a two years of currently being employed. This is to make sure that you can pay your loan and that you have a stable job to support it.
2. If you do not have a job, you must be able to present documents to prove that you have a dependable source of income (e.g Social Security payments, pension payments). They may not allow you if you cannot prove to the lending officers that you have at least a constant flow of income (preferable rising).
3. Another one is that your credit history should at least show some good signs that you are a faithful payee to your debts. You need to present billing statements and other documents to prove it. But even though you have a bad credit history, you have two years to clear up your debts or strike a deal with your creditors.
4. Bankruptcies are also a no-no in your credit report. The somehow acceptable 'bankruptcy age' would be no more than two years. It should also show that you are now back on your own feet again and you have came out of bankruptcy. If you have previous foreclosures, it should not be of more than three years.
5. The loan amount that you can obtain cannot be more than 30% of your total monthly income. If you are sure that you have passed the mentioned requirements above, keep in mind that they would only approve your loan application if it is not over 30% of your gross income. Otherwise, they would not grant it. Keep this in mind so that you'll have it approved.
Above all, remember that FHA loan restriction are not that strict but please do follow them. It is not a reason for you to be lax. After all, rules need to be followed right?
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