FHA Loan Guide
FHA loans are insured by the Federal Housing Administration, which reduces the lender's risk and allows more flexible qualifying guidelines than many conventional programs. They're a popular option for first-time and lower-down-payment buyers.
Who It Tends to Fit
FHA loans often fit borrowers with limited savings for a down payment, a shorter or imperfect credit history, or a higher debt-to-income ratio than conventional guidelines typically allow.
Key Features
- Down payments as low as 3.5% with a qualifying credit score
- More flexible credit history requirements than many conventional programs
- Available for 1-4 unit properties, provided the buyer occupies one unit as a primary residence
- Requires mortgage insurance premiums (MIP), both upfront and annual, which — unlike conventional PMI — often cannot be cancelled without refinancing
General Qualifying Factors
- Credit scores are commonly considered starting in the high-500s to low-600s range, though this varies by lender
- A down payment of at least 3.5% for borrowers who qualify at the lower end of the credit range
- The home must typically be the borrower's primary residence
- The property generally must meet FHA minimum property standards, verified through an FHA appraisal
Exact requirements vary by lender and can change over time, so treat the figures above as general starting points rather than guarantees. A licensed loan officer can confirm current guidelines for a specific program.
Costs to Expect
In addition to standard closing costs, FHA loans include an upfront mortgage insurance premium (which can often be financed into the loan) plus an ongoing annual premium included in the monthly payment.
Also Worth Knowing
Because FHA mortgage insurance often lasts for the life of the loan when the down payment is under 10%, some borrowers plan to refinance into a conventional loan once they've built enough equity.