If you have too much debt to qualify for a conventional mortgage, less than stellar credit scores or not much cash for a down payment, consider buying a home with an FHA loan.
The Federal Housing Administration, a division of the Department of Housing and Urban Development, was created 80 years ago to help low- and moderate-income families borrow the money they need to buy a home.
The FHA doesn’t actually make home loans. It guarantees that lenders will be repaid if you default on the loan.
That guarantee allows banks and mortgage companies to work with borrowers who might not be able to qualify for conventional home loans and at surprisingly competitive interest rates.
The majority of lenders make these mortgages, and about one of every six new home loans is backed by the FHA, according to Ellie Mae, a California-based mortgage technology firm.
There are serious limits on how much you can borrow with an FHA loan for a single-family home — up to $271,050 for single-family homes in most parts of the country or as much as $625,500 in high-cost cities such as New York and San Francisco.