Federal Housing Administration Loans

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FHA loans are mortgage loans insured by the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD).

They are designed to make homeownership more accessible, especially for first-time homebuyers and borrowers with lower credit scores or smaller down payments.

The FHA does not lend money directly.
Instead, it insures the loan made by an FHA-approved lender.

Because the loan is insured by the government:

• Lenders can offer more flexible credit guidelines
• Borrowers can qualify with lower down payments
• Approval is often easier than conventional loans
   

• As little as 3.5% down with a 580+ credit score
• 10% down with credit scores between 500–579
   

• Minimum credit score: typically 580
• Higher debt-to-income (DTI) ratios may be allowed
   

FHA loans require two types of mortgage insurance:

• Upfront Mortgage Insurance Premium (UFMIP) – typically 1.75% of the loan amount
• Annual Mortgage Insurance Premium (MIP) – paid monthly
   

Unlike conventional loans, FHA mortgage insurance often lasts for the life of the loan (unless refinanced).

FHA loan limits vary by county and are generally lower than conventional conforming limits. High-cost areas (like parts of California) have higher limits.

The home must:

• Be the borrower’s primary residence 
• Meet FHA appraisal and safety standards
   

FHA loans cannot be used for most investment properties.

FHA loans are ideal for:

• First-time homebuyers 
• Buyers with limited savings
• Borrowers rebuilding credit
• Buyers with higher debt ratios
   

FeatureFHA LoanConventional LoanDown Payment3.5% minimum3%–5% minimumCredit Score580+ typical620+ typicalMortgage InsuranceRequired (often life of loan)Required under 20% down (can be removed)Property TypePrimary residence onlyPrimary, second, investment  

✔ Easier qualification
✔ Lower down payment
✔ Competitive interest rates

✘ Mortgage insurance required
✘ Property condition standards
✘ Loan limits may be lower