Borrower's Income

• Lenders review the debt-to-income ratios of borrowers before writing loans. As of 2010, the FHA only approves loans for borrowers whose DTI does not exceed 43 percent. DTI ratios include credit related debts as well as property tax and homeowners insurance. Additionally, the FHA also imposes a housing ratio on FHA borrowers. As of 2010, people are not approved for loans if the projected monthly mortgage payment exceeds 31 percent of their gross monthly income.
  
  

Down Payment Criteria

• The FHA requires borrowers to make a minimum down payment of 3 1/2 of the lesser of the purchase price or the appraised value of the home. Lenders are responsible for verifying the source of funds. The FHA underwriting guidelines include an extensive list of acceptable sources of down payment funds that includes money held in Individual Retirement Accounts, checking accounts and savings accounts. Borrowers can also accept gift funds from a relative if the person giving the gift signs a letter stating that the funds do not constitute a loan. Lenders require 60 days of bank statements to verify the origin of funds and copy of a check if funds are derived from a gift.
  
  

Appraisal

• FHA underwriting guidelines require lenders to order full home appraisals for all home purchases. The FHA has its own home appraisal guidelines that differ slightly from regular appraisals and lenders must use FHA approved appraisers. The FHA does not approve home purchases if the appraisal highlights safety hazards such as electrical problems or functionality issues such as blocked septic tanks. After an appraisal, the seller must rectify any issues before the home purchase occurs. The FHA does not require new appraisals for FHA refinances of existing FHA backed mortgages if the new loan does not exceed the amount of the original mortgage.
  
  

Other Criteria

• The FHA backs mortgages for U.S. citizens and permanent residents with a credit score of 620 or higher. Many lenders require higher credit scores for other types of loans. As of 2010, the FHA imposes loan limits on mortgages. In most areas people can borrow up to $271,050, but in certain parts of the United States designated as "high income areas," people can borrow up to $729,750. These limits are subject to change and lenders can appeal if they feel an area warrants inclusion in the "high income" category.