FHA Loans
FHA loans are government-insured mortgages designed to help first-time buyers and those with less-than-perfect credit achieve homeownership with down payments as low as 3.5%.
Program Details
Key Benefits
- Down payment as low as 3.5%
- Credit scores as low as 500 accepted
- Flexible debt-to-income guidelines
- Closing costs can be covered by seller, lender, or gift
- Streamline refinance options
- Non-occupant co-borrower allowed
Program Tags
Who It's Best For
- First-time homebuyers with limited savings
- Buyers rebuilding credit after financial hardship
- Borrowers with higher debt-to-income ratios
- Those who need flexible gift fund rules
- Buyers with non-traditional credit histories
Advantages
- Low 3.5% down payment with 580+ credit score
- More lenient credit requirements than conventional loans
- Higher debt-to-income ratios accepted (up to 50%+)
- Gift funds can cover 100% of down payment and closing costs
- Non-occupant co-borrowers allowed
- FHA Streamline Refinance option for easy rate reductions
- Assumable loans (buyer can take over your mortgage)
- Manual underwriting available for complex situations
Considerations
- •Mortgage insurance premium (MIP) for life of loan in most cases
- •Upfront MIP of 1.75% adds to loan balance
- •Primary residence only—no investment properties
- •Property must meet FHA minimum standards (may limit older home options)
- •Lower loan limits than conventional in some high-cost areas
- •Sellers may prefer conventional offers over FHA
Eligibility Requirements
- Primary residence only (no investment properties or second homes)
- U.S. citizens, permanent residents, and eligible non-permanent residents
- Property must meet FHA Minimum Property Requirements (MPR)
- Loan amount within FHA county limits
- Valid Social Security number and legal U.S. residency
Additional Requirements
- Minimum 580 credit score for 3.5% down (500-579 requires 10% down)
- 2 years of steady employment history
- Upfront MIP of 1.75% (can be financed into loan)
- Annual MIP of 0.55% for most loans
- Property must pass FHA appraisal with health and safety standards
- Must occupy the home within 60 days of closing
Pro Tips
- If your credit is 620+, compare FHA to conventional—conventional PMI may be cheaper and cancellable
- The upfront MIP can be financed into your loan amount, reducing cash needed at closing
- FHA allows 100% of your down payment to come from gift funds—great if family can help
- Consider FHA if you have student loans—FHA uses actual payment (not 1% of balance) for IBR plans
- FHA Streamline Refinance makes it easy to lower your rate later with minimal paperwork
- Non-occupant co-borrowers (like parents) can help you qualify without living in the home
- FHA allows sellers to contribute up to 6% toward your closing costs
Also Known As
Helpful Resources
FHA requires a minimum 500 credit score. With 580+, you qualify for 3.5% down. With 500-579, you'll need 10% down. Most lenders have overlays requiring 580-620+, but we work with investors serving the full FHA credit range.
FHA charges two types of mortgage insurance: an upfront premium (UFMIP) of 1.75% of the loan amount (usually financed into the loan), plus an annual premium of 0.55% for most loans, paid monthly. On a $300,000 loan, that's about $138/month for the annual MIP.
For loans with less than 10% down, MIP lasts for the life of the loan. With 10%+ down, MIP drops off after 11 years. The most common way to eliminate FHA MIP is to refinance into a conventional loan once you have 20% equity.
Standard FHA loans require the property to meet minimum safety standards. For homes needing significant repairs, consider FHA 203(k) renovation loans, which let you finance both the purchase and rehabilitation costs in one mortgage.
FHA guidelines allow up to 43% DTI standard, but automated underwriting can approve up to 50% or even 56.9% with strong compensating factors like high credit scores, significant reserves, or minimal payment increase from current housing payment.
Yes! FHA allows 100% of your down payment to come from gift funds from family members, employers, charitable organizations, or government programs. You'll need a gift letter and documentation showing the funds transferred to you.
FHA has shorter waiting periods than conventional loans. After Chapter 7 bankruptcy: 2 years. After Chapter 13: 1 year into repayment plan with court approval, or 2 years after discharge. After foreclosure: 3 years. Extenuating circumstances may shorten these periods.
Yes! FHA allows 2-4 unit properties if you occupy one unit as your primary residence. This is a great strategy to become a homeowner while rental income from other units helps qualify and pay your mortgage.
Some sellers worry about FHA's property requirements or appraisal process. FHA appraisals focus on health and safety issues that conventional appraisals might overlook. However, for homes in good condition, this rarely causes problems. Strong offers with solid pre-approvals help.
FHA Streamline is a simplified refinance for existing FHA borrowers. It requires minimal documentation—often no income verification, appraisal, or credit check. You must have made at least 6 payments and show a 'net tangible benefit' (usually lower payment or stable rate).
You must occupy the home as your primary residence within 60 days of closing and continue living there for at least one year. After one year, you can convert it to a rental and purchase another primary residence—even with another FHA loan in some cases.
FHA finances single-family homes, 2-4 unit properties (if owner-occupied), FHA-approved condos, manufactured homes on permanent foundations, and some modular homes. Co-ops are not eligible. The property must be your primary residence.
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Typical Documents
- Last 30 days of pay stubs or income docs
- Last 2 years W-2s or 1099s (as applicable)
- Most recent 2 months of bank statements
- Government-issued ID
- Evidence of funds for 3.5% down
- FHA property standards apply
Exact items vary by program and scenario.
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Information provided is for educational purposes only and is not a commitment to lend. All loans subject to underwriting approval. Rates and terms subject to change. Equal Housing Lender. Equal Housing Opportunity.