Buying a Minnesota home for the first time can seem like a daunting task, but that doesn’t mean it should be viewed as an unobtainable goal. But staying organized throughout the entire home buying process is important and will ultimately make finding and securing your new home a whole lot less stressful along the way. 

So, before you start looking for homes or even apply for a FHA home loan in Minnesota, take note of the following FHA loan checklist we’ve devised to help get you going in the right direction: 

√ Check your credit score - If your credit score is below 580, don’t apply for a home loan just yet. FHA loans require a minimum score of 580, and checking your credit score also gives you an opportunity to make sure everything is in order. 

√ Begin saving for a down payment - Although FHA loans only require a low 3.5 percent down payment, that’s still quite a bit of money you’ll need to have at your disposal. So devise a plan that helps you save, or check out our short list of tips for how to save for a down payment. 

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While the list of mortgage products out there today is actually quite extensive, FHA loans remain one of the top ways for first time home buyers in Minnesota to secure financing. Specifically designed to attract would-be home buyers with lower incomes or buyers unable to afford a substantial down payment, loans backed by the Federal Housing Association continue to help keep the dream of home ownership alive and well all over the U.S. 

If you’re unsure whether or not a FHA loan is right for you, here’s a brief rundown of FHA loan requirements and eligibility standards: 

Minimum Credit Score 

Although FHA loans help buyers with lower credit secure financing for a home purchase, you'll likely still need a credit score of 580 or higher.

Minimum Down Payment 

Prospective borrowers won’t need a 20 percent down payment with a FHA loan. In fact, you don’t even need 10 percent down. However, FHA loans do require 3.5 percent of the purchase price. 

Minimum Income 

While FHA loans don’t have defined income requirements, you’ll of course still need to provide proof you can afford a monthly mortgage payment. One way this is done is by making sure you don’t exceed a 43 percent debt-to-income ratio, and most lenders will even...

So, you’ve improved your credit score to a satisfactory level, you’ve either eliminated most of your debt or reduced it to below the FHA requirement of a 43 percent DTI, and you’ve gathered all your income documents to prove you can afford to take on a mortgage payment. The next logical question—now what? 

Well, the simple answer is, let the home search begin! But before you start diving into what’s currently on the market, it’s first best to understand exactly what you’re able to buy under FHA guidelines.

First and foremost, home buyers must be purchasing their primary residence when opting for a FHA loan. Vacation homes, a second home, and rental properties won’t be covered under FHA requirements. 

It is worth noting, however, that FHA financing CAN be used to purchase a family member a primary residence, and you’re also allowed to buy a duplex home using a FHA loan, as long as you live in one of the units for a minimum of one year. 

If you’re a first time home buyer in Minnesota and have already started researching financing, chances are you’ve come across the words ‘debt-to-income ratio.’ Regardless of whether you’re looking to take out a FHA loan or a traditional mortgage with 20% down, lenders still need to determine each borrower’s ability to repay the loan and manage a monthly payment. 

One such method in deciding affordability is comparing a prospective borrower’s overall debt with his or her overall income—a personal finance measure known as debt-to-income ratio. 

Debt-to-income ratio, or DTI for short, is calculated by dividing recurring monthly debt payments by gross monthly income, which is then expressed as a percentage that equals how much of your gross income is already committed to existing debt.

For example, if your total debt equals of a $200/month student loan payment, a $300/month car payment, and a $1,000/month mortgage payment, and your total monthly income is $4,500, you DTI would be $1,500 ÷ $4,5000 =0.33, or $33%. 

As a general rule, most lenders prefer a debt-to-income ratio to...