FHA Loan Requirements PA (Pennsylvania)

Purchasing your first home can be intimidating, especially if you haven’t banked big bucks for a down payment. However, with a Federal Housing Administration (FHA) loan, you can purchase your first home with confidence even if you have a limited budget and minimal to no down payment resources. Just be aware of FHA loan requirements for PA (Pennsylvania), so you’ll know what information mortgage lenders need to see.

FHA loans are insured by the federal government. This gives creditors and financial institutions the ability to lend to qualified borrowers without risk. It also makes it easy for borrowers like you to pre-qualify for Pennsylvania FHA loans. Plus, FHA loans, unlike their conventional counterparts, don’t require any cash reserves. Before you commit, there are other details, such as mandatory mortgage insurance, you need to understand.

Here’s what to know about FHA loan requirements for PA:

Credit score and history

If you want to purchase a home one day, start building good credit immediately. But even if you’re ready to buy a home but your credit score isn’t, you may still qualify for an FHA loan. As of 2022, you can borrow up to 96.5% of your home’s value with a FICO score of at least 580.

Required down payment of 3.5%

If you have a solid credit score (and because the FHA insures all loans), you can reap the benefits of a modest 3.5% down payment. However, if your credit score falls between 500 and 579, your financial institution may expect an increased 10% down payment.

Healthy debt-to-income ratio

Requirements for debt-to-income ratios vary among mortgage lenders. Borrowers should typically exhibit a ratio of less than 43%; however, this information isn’t only for your lending institution. To ensure your budget stays sustainable and strong, carefully calculate your expenses versus your income to make sure you can afford your long-term mortgage payment.

Stable employment and income

To complement that solid debt-to-income ratio, have two years of continuous employment with no questionable gaps in job history.

There’s an exception to the two years of continuous employment rule for recent college graduates. If you are employed in your field of study, you may be able to qualify before hitting your two-year work anniversary. Explore this possibility with your loan officer if this exception might apply to you.

Required mortgage insurance premium

One responsibility you may overlook is a mortgage insurance premium or MIP. This additional expense, which you’ll need to secure a loan, includes an initial payment of 1.75% of your total loan. Upfront MIP doesn’t require you to budget for an additional cost as it’s financed into your total loan amount.

Pennsylvania FHA loan caps

FHA mortgage lending limits vary based on the type of home and local housing prices. In general, loan caps in Pennsylvania are $420,680 for a single-family, one-unit property. The cap increases to $477,250 around Philadelphia and tops out at $970,800 in Pike County.

To further assist new homebuyers, the FHA provides 15- to 30-year loans with fixed and adjustable interest rate options. Plus, FHA loans allow the seller to cover closing costs up to 6%.

Most homes and condos, including short sales and foreclosures, in good, move-in condition are eligible for FHA financing. So if you’re ready to purchase your first home, reach out to OVM Financial’s experts, who can help you along the way. Give us a call or start your application online. You can also check out other articles about FHA loan requirements in VA and FHA loan requirements in TN.

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