FHA (Federal Housing Administration) loans are government insured loans. It is to help borrowers obtain a loan by insuring lenders to help lower their risk. Therefore allowing more people who cannot afford to go conventional have another option to become a homeowner. An FHA loan is easier to obtain than a conventional loan. They will accept a credit score of 580. But, most lenders will still require at least a 640. Your down payment can be 3.5% of the sales price in comparison to 20% with a conventional loan. Because FHA is not a lender but an insurer, the lender must be FHA approved. You will have to pay a portion of your PMI (Premium Mortgage Insurance) upfront. PMI protects the lender in case you default on the loan. The PMI upfront premium right now is 1.75% of the loan amount. It can be financed as a part of the loan. The remainder of your PMI is now paid for the life of the loan. PMI is paid monthly with your mortgage. FHA loan limits vary from state to state based on the type of housing and county.
FHA requires that only an FHA appraiser can appraise the home.
FHA determines how much closing cost the borrower can pay.
FHA has set guidelines for the borrower's debt to income ratio. That is how much debt you have compared to your income. This prevents borrowers from getting a house they cannot afford, which can lead to foreclosure.
FHA requires a lot of information when applying for a loan. You will need your W2s for the past 2 years, Income tax forms from the past 2 years, all of your addresses from the past 2 years, and you employer over the past 2 years along with gross monthly salary.
If you would like to get an estimate of what your monthly mortgage payments would be on a home, here is a link to an FHA mortgage calculator.
http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx