The general FHA approval process for both 30-year and 15-year FHA mortgages is as follows.

• The FHA determines eligibility of lenders, such as U.S. Bank.
• The FHA also determines your eligibility criteria to apply for an FHA loan.
• After meeting the FHA criteria to apply, you’ll need to meet the credit criteria of the approved lender/U.S. Bank. These credit requirements vary by lender.

The FHA approval process is different than the conventional mortgage process. Our experienced mortgage loan officers can assist you with your application and answer any questions.

There are many FHA loan benefits and considerations you should keep in mind when evaluating your loan options.

• Lower credit requirements – Credit requirements (for example, below average credit scores) are usually lower than those of conventional mortgages.
• Loan relief – If you experience a financial hardship, you may be eligible for loan relief.
• No prepayment penalty – You can repay your loan before the end of the term without any penalties.
• Assumable mortgage – If you wish to sell your home, the buyer may be able to “assume” or take over your FHA mortgage.

Credit requirements for an FHA loan vary by lender. At U.S. Bank, most FHA refinances require a credit score of 620 or higher. Talk with a U.S. Bank mortgage loan officer to learn more about qualifying for an FHA loan.

Below is a summary of the requirements. Note, exceptions may apply.

As an FHA borrower:

• You must maintain mortgage insurance for a minimum of 11 years.
• Your total monthly debts must be below 43% of your gross monthly income.
• Your total mortgage payment must be below 31% of your gross monthly income. Mortgage payments include property taxes, mortgage insurance, homeowners insurance and homeowners association fees (if applicable). Use our mortgage refinance calculator to get an estimate of your monthly payments.
• You must show proof of steady employment or you have worked for the same employer for the past 2 years.
• You must have a loan amount below the FHA mortgage loan amount limit. This limit caries by state, county and type of property.
• You must not have declared bankruptcy within the past two years.
• You must not have been in foreclosure within the past three years.

The property must:

• Be your primary residence
• Be a single-family home, a one- to four-unit building or an FHA approved condominium, manufactured home or mobile home
• Not be an investment property
• Be appraised by an FHA-approved appraiser
• Be in good condition. The FHA requires the seller to make any needed repairs before closing. Or, you can agree to pay for the required repairs at closing.

All FHA loans must have mortgage insurance. This is regardless of the borrower's credit score and down payment. The FHA uses these funds to cover the costs of defaults.

FHA mortgage insurance is usually more expensive than the private mortgage insurance (PMI) required on a conventional loan. Additionally, you must maintain FHA loan insurance for a minimum of 11 years. By contrast, for applicable conventional loans, you must maintain private mortgage insurance (PMI) only if your down payment is below 20% of the loan amount or until your home equity reaches 20%.

There are two types of FHA mortgage insurance:

• Upfront mortgage insurance premium (UFMIP) – This is a one-time upfront charge of 1.75% of your loan amount for most FHA loan scenarios. You may pay it in full at closing or add it to your loan balance.
• Mortgage Insurance Premium (MIP) – This is an annual insurance premium that is required to be paid monthly. Your lender will incorporate it into your monthly mortgage payment. Amounts for this insurance range from 0.55% to 1.05% of the loan balance on a 30-year FHA.

Talk with a U.S. Bank mortgage loan officer to learn more about FHA mortgage insurance.

There are important differences between an FHA loan and a conventional loan. Which one is better for you depends upon your financial circumstances. Consider the following:

• An FHA loan may be your only option if you do not meet the credit qualifications of a conventional loan. A conventional mortgage is a better option if your credit score is above 740. If this is your circumstance, then you do not need to pay for the expensive mortgage insurance (both UFMIP and MIP) required for FHA loans provided the equity in your home is at least 20%.
• If you have equity in your home, your credit score will dictate which loan is best for you. The cost of PMI on a conventional loan goes down as your credit score goes up. The cost of FHA mortgage insurance is not determined by your credit score.
• A conventional mortgage is usually a better option if you have good credit. You’ll be able to skip FHA mortgage insurance. A conventional loan may be your only option if the property does not meet FHA requirements. These include investment properties, vacation homes and properties in need of major renovations.

An experienced U.S. Bank mortgage loan officer can help you determine the best option for you.