 TITLE: What Is an FHA Loan? CONTENT: How to Qualify for an FHA Loan\n------------------------------\nDoes an FHA loan sound like the right fit for you? Here's how to get ready to qualify:\n*   **Check your credit score.** If it isn't high enough to qualify for an FHA loan yet, make strides to improve your credit score.\n*   **Make sure you have an established credit history.** It's ideal to have at least two open accounts—preferably, one revolving account (such as a credit card or line of credit) and one installment account (such as an auto loan). If you don't, lenders may not believe you have enough repayment history to show that you're capable of paying back a loan on time. If you don't have a credit card yet, consider getting one and using it responsibly for a few months to help establish some positive credit history.\n*   **Have a verifiable income.** You'll need to show a lender documents like paystubs, tax returns and possibly bank statements to prove that you have enough money to comfortably pay your mortgage. Make sure you'll be able to have this documentation.\n*   **Calculate your DTI.** To do this, tally up your total recurring monthly debt (such as credit card payments, mortgage, auto loan and so on) and divide it by your gross monthly income (the total amount you make each month before taxes, withholdings and expenses). Multiply that number by 100 to get your DTI ratio as a percent. Keep in mind that you might not get approved for an FHA loan if your DTI is higher than 43%. Also, your mortgage payment ideally shouldn't be more than 35% of your income. If any of these are issues, work to lower your debt balances (or increase your income) before applying for an FHA loan.\n*   **Save for a down payment.** While you can nab a down payment as low as 3.5% with an FHA loan, it's smart to save up to at least 6% so you have enough funds to cover your closing costs. While FHA loans do give you the option of financing some of your closing costs, know that rolling them into your monthly payment will make your mortgage payment higher.\n*   **Choose the right type of FHA loan.** You might just need a basic FHA loan, but if you're buying a home that needs significant repairs or energy-efficient upgrades, consider the other types of FHA loans made specifically for these purposes.\n*   **Shop around before choosing a lender.** While lenders have to adhere to certain FHA guidelines, they're able to set their own interest rates. This means it pays to shop around and compare rates and fees at several different lenders to make sure you're getting the best deal. END