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This information I thought would help you understand the FHA Home Loan Program
From the FHA website

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FHA Requirements

Closing Costs and Allowable Charges:
While FHA requirements define which closing costs are allowable as charges to the borrower, the specific costs and amounts that are deemed reasonable and customary are determined by each local FHA office. All other costs are generally not allowed and are usually paid by the seller when buying a new home, or paid by the lender when refinancing your existing FHA loan.

Lender's origination fee
Deposit verification fees
Attorney's fees
The appraisal fee and any inspection fees
Lender's origination fee
Cost of title insurance and title examination
Document preparation (by a third party)
Property survey
Credit reports (actual costs)
Transfer stamps, recording fees, and taxes
Test and certification fees
Home inspection fees up to $200

How FICO Scores Affect Your FHA Home Loan

Do you know how your FICO scores can affect your FHA home loan application? Do you know the difference between the FHA loan program minimum scores for loan approval and your lender’s FICO score requirements? There IS a difference.

FHA loan rules in HUD 4000.1, referred to as the FHA Handbook, instruct the lender that a borrower is technically qualified for maximum financing at the required minimum 3.5% down payment when the applicant has FICO scores at 580 or higher.

Borrowers applying for FHA forward mortgages with FICO scores between 500 and 579 are technically eligible for FHA loans with a 10% minimum required down payment.

These are FHA loan program minimum requirements which do not reflect lender standards, which may be (and often are) higher than the FICO scores mentioned above. Furthermore, FHA loan rules state that a borrower’s FICO scores are not the only measure of a borrower's creditworthiness. Your record of payments, overall patterns of credit use, and employment history are also considered when the lender is in the process of approving or denying an FHA loan.

Those who apply for a mortgage with at least 12 months of on-time payments on ALL financial obligations leading up to the loan application stand a far better chance of loan approval. Time your FHA loan application so that when you fill out the forms, there are 12 months (minimum) of on-time payments on your credit history.

HUD 4000.1 tells the lender that all who are to be obligated on the mortgage are required to credit qualify. A lower FICO score is not always a barrier to loan approval depending on lender standards and whether there are "compensating factors" such as a larger down payment, or substantial cash reserves (just to name two examples) that could help a borrower who is borderline where the lender’s FICO score requirements are concerned.

Borrowers take note-these factors cannot offset derogatory credit information that shows consistent patterns of being a poor credit risk.

Your lender may be able to work with you if you have blemishes on your credit record if your other credit patterns indicate reliability. Much depends on your circumstances, your ability to document one-time financial difficulties or other issues that may not reflect who you really are as a responsible credit user.

FYI: How is generated the credit score

A credit score is a number generated by a mathematical formula that is meant to predict credit worthiness. Credit scores range from 300-850. The higher your score is, the more likely you are to get a loan

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Easier to Qualify
FHA provides mortgage programs with lower requirements. This makes it easier for most borrowers to qualify, even those with questionable credit history and low credit scores.
Competitive Interest Rates
FHA loans offer low interest rates to help homeowners afford their monthly housing payments. This is a great benefit when compared to the negative features of subprime mortgages.
Bankruptcy / Foreclosure
Having a bankruptcy or foreclosure in the past few years doesn't mean you can't qualify for an FHA loan. Re-establishing good credit and a solid payment history can help satisfy FHA requirements.
Determining Credit History
There are many ways a lender can assess your credit history, and it includes more than just looking at your credit card activity. Any type of payment such as utility bills, rents, student loans, etc. should all reflect a general pattern of reliability.

Your FHA lender will review your past credit performance while underwriting your loan. A good track record of timely payments will likely make you eligible for an FHA loan. The following list includes items that can negatively affect your loan eligibility:

No Credit History
If you don't have an established credit history or don't use traditional credit, your lender must obtain a non-traditional merged credit report or develop a credit history from other means.
Bankruptcy
Bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage. For Chapter 7 bankruptcy, at least two years must have elapsed and the borrower has either re-established good credit or chosen not to incur new credit obligations.
Late Payments
It's best to turn in your FHA loan application when you have a solid 12 months of on-time payments for all financial obligations.
Foreclosure
Past foreclosures are not necessarily a roadblock to a new FHA home loan, but it depends on the circumstances.
Collections, Judgements, and Federal Debt
In general, FHA loan rules require the lender to determine that judgments are resolved or paid off prior to or at closing.

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What Is An FHA Loan?
An FHA loan is a government-backed home loan insured by the Federal Housing Administration. An FHA loan has less restrictive qualifications, which can make it a good choice if you’re worried about coming up with a down payment and/or have a lower credit score.

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FHA LOAN CREDIT ISSUES

Your FHA lender will review your past credit
performance while underwriting your loan. A good track record of timely payments will likely make you eligible for an FHA loan. The following list includes items that can negatively affect your loan eligibility:

No Credit History
If you don't have an established credit history or don't use traditional credit, your lender must obtain a non-traditional merged credit report or develop a credit history from other means.
Bankruptcy
Bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage. For Chapter 7 bankruptcy, at least two years must have elapsed and the borrower has either re-established good credit or chosen not to incur new credit obligations.
Late Payments
It's best to turn in your FHA loan application when you have a solid 12 months of on-time payments for all financial obligations.
Foreclosure
Past foreclosures are not necessarily a roadblock to a new FHA home loan, but it depends on the circumstances.
Collections, Judgements, and Federal Debt
In general, FHA loan rules require the lender to determine that judgments are resolved or paid off prior to or at closing.

The FICO® score is a number that represents a potential borrower's creditworthiness. FICO® is a data analytics company which uses consumer credit files collected from different credit bureaus to compute their scores.

Your FICO® score is reviewed by lenders and is used to determine how likely you are to make timely payments on your mortgage. The higher the score, the better your chances are of getting a lower interest rate on your mortgage.

The FICO® score is a number that represents a potential borrower's creditworthiness. FICO® is a data analytics company which uses consumer credit files collected from different credit bureaus to compute their scores.

Your FICO® score is reviewed by lenders and is used to determine how likely you are to make timely payments on your mortgage. The higher the score, the better your chances are of getting a lower interest rate on your mortgage.

FHA home loans