Do You Qualify for an FHA Loan in Portland, ME?

Most people open with the same question about FHA: will I qualify? It's a fair question, and the honest answer is better than a single cutoff number. FHA looks at your whole file, and most of it is something you can check yourself before you apply.

My Maine FHA loan page covers the program as a whole. This post is only about you, the borrower, and what HUD asks of you.

What credit score does FHA require?

HUD sets the floor, and it works in tiers. A minimum decision credit score of 580 or higher qualifies for FHA's maximum financing. A score from 500 to 579 can still qualify, but the loan is capped lower against the home's value, so you bring more to closing. Below 500, FHA financing isn't available.

A thin credit file isn't a dead end either. HUD allows borrowers with little or no traditional credit to qualify for maximum financing. The file just goes through a manual review by an underwriter instead of an automated one.

If your credit has a rough patch, tell me at the start. It's much easier to plan around than to discover in underwriting.

Does a lower score make FHA cost more?

Not on the mortgage insurance line. FHA's premium is the same regardless of your credit score, because HUD sets the annual premium by loan amount, loan to value, and term. Your score still matters for approval and for how lenders price the loan, so it's worth protecting.

How does FHA look at your income?

FHA cares about how steady your income is. The lender verifies your most recent two years of employment and income and confirms your current job. Here is what that usually takes.

• Recent pay stubs
• W-2s for the last two years
• Tax returns, especially if you're self employed or paid on commission
• Bank statements for the accounts you'll use at closing

If you changed jobs or had a gap, have a short explanation ready. Underwriters ask, and a clear answer keeps the file moving.

Self employed borrowers can qualify too. Expect to document income with personal and business tax returns rather than pay stubs. The longer and steadier your track record, the smoother the review.

How do your debts fit in?

Lenders compare your monthly debts, including the new house payment, with your gross monthly income. That comparison is your debt to income ratio. HUD's handbook sets the limits an FHA underwriter works within, and the automated review weighs your whole file.

Car loans, student loans, and credit card minimums all count. Paying a card down before you apply can help. So can holding off on a new car until after you close.

Can a family member help you qualify?

Yes. FHA allows a co-borrower who won't live in the home, such as a parent, to sign the loan with you. Their income and debts go into the review alongside yours, and they share responsibility for the loan.

At least one borrower still has to live in the home. Anyone who signs should understand they're responsible for the loan right along with you.

Does the home have to be your principal residence?

Yes. FHA is for a home you'll live in. At least one borrower has to move in within 60 days of closing and intend to stay for at least a year.

A person can have only one principal residence at a time, so FHA isn't meant for a vacation place or a straight rental. It does work for a two to four unit building where you live in one unit.

What about the house itself?

The house has its own review, separate from yours. The appraiser checks value and basic safety, and older Portland homes can need paint or roof work cleared before closing. Condos need FHA approval, and a two to four unit building works when you live in one unit. I cover that side in my guide to FHA loans near Portland.

What can you do now to get ready?

A few steps help no matter where your file stands today. None of them cost anything.

• Pull your free credit reports and dispute anything that's wrong
• Pay every bill on time from here to closing
• Hold off on new credit cards and car loans
• Keep bank deposits easy to explain, since underwriters ask about large ones

Where should you start?

Start with a conversation, not a house hunt. As a mortgage broker, I review your credit, income, and debts the same way I do for all my clients, then tell you plainly what fits, what needs work, and how long that work might take. Shopping more than one lender won't wreck your credit, because multiple mortgage credit checks within 45 days count as a single inquiry.

If you're still deciding who should handle the loan, read how to find FHA loans near me. For the numbers, read what an FHA loan actually costs.

FAQ

What is the minimum credit score for an FHA loan?

HUD's floor is a minimum decision credit score of 500. A score of 580 or higher qualifies for FHA's maximum financing, while a score from 500 to 579 means the loan is capped lower and you bring more to closing.

Can I use FHA if I already own a home?

Yes, if the new home will be your principal residence. A person can have only one principal residence at a time, so FHA isn't meant for a second home or a rental purchase.

How many years of income does FHA look at?

The lender verifies your most recent two years of employment and income and confirms your current job. Pay stubs, W-2s, and tax returns are the usual proof.

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Wondering where your file stands for FHA? Call or text me at (207) 615-7770 and I'll tell you plainly what fits and what needs work.

Started in 2004 and I'm still here.