What Is FHA Loan?
FHA Loan: A mortgage insured by the Federal Housing Administration, with low down payments and flexible credit.
An FHA loan is insured by the Federal Housing Administration, part of HUD. Because the government insures the lender against loss, FHA loans accept lower credit scores and down payments than many conventional loans.
Key features
- Down payment: 3.5% with a 580+ score; 10% with 500–579
- Credit: more forgiving of past credit events
- DTI: higher ratios allowed with automated approval
- Mortgage insurance: an upfront premium of 1.75% of the loan (usually financed) plus an annual mortgage insurance premium paid monthly
- Loan limits: set by county
- Occupancy: primary residences only, one to four units
Property standards
FHA appraisals check minimum property requirements. Safety or soundness problems must be fixed before closing. Condos must be FHA-approved.
Who it fits best
Buyers with scores below about 680, higher debt ratios or limited savings. FHA also allows the whole down payment to be a gift.
Good to know
With less than 10% down, FHA mortgage insurance lasts for the life of the loan. Many borrowers later refinance into a conventional loan to remove it.