The federal government has a program of offering guarantees for loans. The easiest type of real estate mortgage loans to qualify for are Federal Housing Administration (FHA) loans. The FHA guidelines for loan qualification are more flexible than other mortgage loans and require only 3% down payment or less.

FHA Loan Qualifications

You must document 2 years of steady employment, preferably with same employer, with the last two years showing the same or increasing income. Your credit report should have less than 2 dings showing 30 day late payments in the past two years. Any bankruptcy must be at least two years with no credit problems since then. You must have three years of good credit since any foreclosure. Your mortgage payment can only be about 30 percent of you gross income.

Benefits for FHA Mortgages

It is easier to use a gift towards the down payment and closing costs. You will find there is no prepayment penalty. Sometimes an FHA loan is assumable provided the new owner qualifies under FHA guidelines. It is possible that the lending agency will be more lenient, in times of financial distress.

Why an FHA Loan Might Not be for You

There are dollar limits according to the local area of how much mortgage FHA is willing to guarantee. If you need a large mortgage, this might not be the right program for you. Additionally, upfront federal mortgage insurance premium and ongoing premiums is often more costly than private mortgage insurance. If you are a home buyer with a good credit school, you may easily find standard loans with very little down that are more competitive than FHA loans.

As always, you should compare FHA loans against other mortgage options. FHA loans appeal particularly to home buyers with less cash reserves as FHA does not require borrowers to have reserves of up to three months of payments after closing. Lenders want to make sure that you will get off to a good start making your monthly payments.