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  • Writer's pictureSara Yuen

Home Loan Requirements for 2022

For many Americans, purchasing a home is the accomplishment of the "American Dream." Getting to come home to something you own –– or are making payments to own –– can be an amazing feeling. Almost 75% of Americans surveyed said they placed owning a home over a successful career or having a family in terms of priorities. However, owning a home may seem out of reach, with the modern housing market at a record high.

Fortunately, home loans make it possible to purchase a place to call your own. If you're looking to purchase a home but are unsure if you would be eligible for a home loan, the Trusted Referral Network has outlined the key requirements for a home loan in 2022.

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Conventional Loans vs. FHA Loans

When applying for a home loan, it's important to understand the different types of loans and their requirements. The two main types of home loans are FHA (Federal Housing Administration) loans and conventional loans. Conventional loans are more common than FHA loans, and typically serve borrowers with higher credit scores and lower debt. FHA loan requirements are more lenient; those with lower credit scores and less cash for a down payment may benefit from FHA loans.

Conventional Loan Requirements

To qualify for a conventional loan, borrowers will likely need a minimum credit score of 680. This is partially because the federal government does not insure conventional loans, so private lenders assume more risk. Borrowers will also need to save up a down payment, ranging from 3-40%. However, borrowers with less than a 20% downpayment may still be able to get approved but will need mortgage insurance to compensate. Whereas an FHA loan is limited to primary residences, conventional loans can be used to finance the purchase of an investment property.

FHA (Federal Housing Administration) Loan Requirements

Compared to conventional loans, the requirements of FHA loans are far lower. Most FHA loan lenders require borrowers to have a credit score between 620 and 640, but some borrowers who meet the down payment requirement (3.5% or greater) may be approved with as low as a 580 credit score. FHA loans are also federally insured, government-backed mortgages, and FHA loans require private mortgage insurance –– which protects the mortgage lender in the event that a homeowner cannot meet monthly mortgage payment requirements. Monthly FHA mortgage insurance costs vary from .45% to 1.05% of the total loan amount.

In addition to the above requirements, borrowers should be familiar with FHA loan limits. FHA loan limits have increased for 2022, with 1-unit homes in "low-cost" counties being limited at $420,680 while "high-cost" counties are capped at $970,800. Outside of these ranges, FHA loans run the risk of becoming "jumbo loans," which have their own set of special demands.

Closing Costs

For conventional and FHA loans, borrowers will need to save some money for closing costs. Be sure to ask your lender for an estimate of closing costs so you can budget accordingly, but expect to pay more in closing costs for an FHA loan. These fees are associated with the loan application process and can add up quickly.

VA Loans

In addition to FHA loans and conventional loans, some borrowers may be eligible for VA loans. These loans are exclusive to those who have performed military service and have lower credit score minimums and more lenient debt-to-income limits. One of the key differences with VA loans is that they do not require a downpayment, though some lenders may require a higher credit score for veteran borrowers without a downpayment.

Find the Right Type of Home Loan for You

If you're looking for a home loan in 2022, know you have several options. Whether you are considering conventional loans, FHA (Federal Housing Administration) loans, or a VA loan, be sure you keep these requirements in mind. For more resources and the latest news on loan requirements, visit the Trusted Referral Network.




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