FHA loan programs do not directly give money to borrowers that apply. Lenders who are FHA approved give funds to borrowers and the FHA (Federal Housing Authority) guarantees the loan. What's great about FHA loans is that they are flexible and look at the big picture when it comes to their potential borrowers.

How are FHA Loan Programs Flexible?

FHA loan programs offer more flexibility in terms of their loans than the standard mortgage rates. Down payments are much more flexible with FHA loan programs than others. For example, instead of paying the standard 10 percent or 20 percent down you can pay as little as 3.5 percent down.

Many loan programs expect a borrower to have stellar credit ratings. However, FHA doesn't require your credit to be perfect. It does need to be good, but there are situations when you can receive an FHA loan with poor credit.

When programs consider your credit rating, they want to see if you have poor credit due to late payments or if your poor credit is simply a matter of not having any credit. If you just don't have credit, they'll look at other factors to determine how well you pay your bills and if you do so on time.

Also if you have a foreclosure or bankruptcy on your credit rating and it's been three years or more, you might be fine in terms of receiving an FHA loan.

What are Some Requirements of FHA Loan Programs?

There are some basic requirements when applying for an FHA loan. You should have two years of steady employment and it is preferred to have been with the same employer for two years. The last two years of your income should be increasing exponentially as well.

For a credit score any late payments should be limited to two in quantity within the last two years. The credit score should be at least 620. Bankruptcy or foreclosure won't disqualify you unless they are within two to three years of application.

The amount of your FHA loan request should not exceed 30 percent of your income before taxes. Most mortgage lenders ask that you limit your monthly housing payment to 28 percent of your gross income just to keep yourself from becoming what they call "home poor".

Does Anyone Not Get Approved for FHA Loan Programs? Yes, there are those who have poor credit due to late payments who are turned down for an FHA loan. There are also those with recent bankruptcies or foreclosures who are turned down for FHA loan programs because of ineligibility.