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The good news is that if you can qualify for an FHA loan you'll be required to put much less money down. The bad news is that FHA loans require you to provide a lot more documentation. You will need to provide the addresses of every place you lived in the past two years, the names and addresses of your employers for those two years and the amounts of your gross monthly salaries. You will also be required to provide W-2s for the past two years and copies of the income tax forms you submitted the past two years.
If you choose to apply for an FHA loan you can submit your paperwork electronically and the FHA TOTAL scorecard will be used to measure the credit risk of all FHA loans you submit through its automatic underwriting system. It's also important to understand that FHA loans don’t come directly from the FHA ( Federal Housing Administration).
What an FHA loan means is that the FHA guarantees the home loan, which reduces the risk to your lender and offers increased borrowing power. One of these loans can be particularly helpful if you don't have much money saved for a down payment or have a poor credit score. In fact, the FHA recently made some policy changes including the fact that new FHA borrowers could have a minimum credit score of 580 and still qualify for the most favorable down payment plan, which is currently just 3.5%. However, if your FICO score is less than 580 you will be required to put 10% down.