our everyday life

How to Prequalify for an FHA Loan

by K.C. Hernandez, studioD

Prequalifying for a home loan lets you know what you can reasonably afford. It occurs before the formal application process for a home loan. Borrowers of Federal Housing Administration loans benefit from flexible qualifying guidelines and a low down payment requirement of 3.5 percent. As an agency that insures loans, the FHA sets the standards for lenders to follow in order to gain protection against default. You must consult an approved lender -- a lending institution knowledgeable about the FHA's guidelines and approved to do business with it -- to explain the benefits and limitations of this loan type.

Locate an FHA-approved lender by using the Department of Housing and Urban Development's online search tool. You may also call or visit your local bank and ask if it offers FHA loans. A real estate agent also can refer you to an approved lender, either a direct lender or mortgage broker who can shop among several wholesale lenders.

Prepare to answer questions about your finances, including your annual gross income for the past two years, the total of your monthly obligations, your liquid assets and your credit score. Refer to your previous years' tax returns, W-2s and a recent pay stub to get the most accurate figures. You can pull your own credit online at AnnualCreditReport.com or refer to your most recent bills for the minimum payments on loans, credit cards and other obligations. Also, review your most recent checking, savings, retirement and investment accounts to determine the total of your liquid reserves.

Interview with a loan representative at the lending institution by phone or in person. Some lenders offer online pre-qualifying tools in which you input the basic financial information, such as income, monthly debts and assets. Some lenders may also require a credit check as part of the pre-qualification process and charge you a fee -- usually less than $20 per person.

Provide additional information the lender needs to give you the maximum loan amount you qualify for, an estimated interest rate and total housing payment. For example, if you plan to receive gifted funds from a relative to cover the down payment and closing costs, let the loan officer know this, as it may affect the interest rate. Also, let her know if you plan to purchase a condominium or property in an area where a homeowners association or special tax assessments apply, as these also affect your interest rate and total monthly payment.


  • The FHA allows you to qualify for a housing payment, which includes principal, interest, taxes, homeowner's insurance and mortgage insurance, that equals about 31 percent of your monthly income.
  • Provide financial information for all individuals who will be responsible for the loan. If you are married, provide your spouse's information as well, even if the spouse has no income.

About the Author

K.C. Hernandez has covered real estate topics since 2009. She is a licensed real estate salesperson in San Diego since 2004. Her articles have appeared in community newspapers but her work is mostly online. Hernandez has a Bachelor of Arts in English from UCLA and works as the real estate expert for Demand Media Studios.

Photo Credits

  • Stockbyte/Stockbyte/Getty Images