Purchase Loans
FHA loans are insured by the Federal Housing Administration and built to make homeownership accessible to buyers who don’t fit tidy conventional boxes — lower credit scores, thinner savings, non-traditional income history. The FHA doesn’t lend money directly; it insures lenders against loss, which lets those lenders approve borrowers at 580 credit scores with 3.5% down, terms conventional programs don’t reach. That safety net has a cost. FHA loans carry two layers of mortgage insurance: a 1.75% upfront premium (UFMIP) rolled into the loan at closing, and a monthly MIP that, for most modern FHA loans, lasts the entire life of the loan. The only way off monthly MIP is to refinance into a conventional loan once you’ve built 20% equity. That permanent MIP is why FHA is excellent for getting into a house but often worth refinancing out of three to five years later.
FHA loans require an upfront mortgage insurance premium (UFMIP) of 1.75% at closing, plus an annual MIP spread across monthly payments.
Down payments can come from savings, gift funds from family, employer assistance, or eligible down payment assistance programs — 100% gifted is allowed.
FHA loan limits vary by county, updated annually. The 2024 “floor” is $498,257 in most areas; high-cost counties go up to $1,149,825.
FHA is for primary residences only — no investment properties or second homes. You must occupy within 60 days of closing.
The property itself must meet FHA’s Minimum Property Standards. Condition issues flagged at appraisal (peeling paint on pre-1978 homes, missing handrails, exposed wiring) must be repaired before closing.
Monthly MIP is permanent on loans with less than 10% down. With 10%+ down, MIP drops off after 11 years. Otherwise the only way to escape MIP is to refinance into a conventional loan once you have 20%+ equity.
FHA’s 3.5%-down plus 580-credit entry point gets you into a home that conventional wouldn’t price competitively. Plan to refinance to conventional once you reach 20% equity to shed the monthly MIP.
FHA accepts credit scores as low as 580 (500–579 with 10% down), bankruptcies two years after discharge, and foreclosures three years after completion. Conventional is stricter on all three.
FHA is more forgiving than conventional on manual underwrites and on non-traditional credit history — rent, utilities, insurance, and other recurring payments can substitute for trade lines.
FHA allows non-occupying co-borrowers — a parent can co-sign to help you qualify without having to live in the home. Their income and credit count toward the approval.
FHA allows sellers to credit up to 6% of the purchase price toward closing costs and prepaids — higher than conventional’s 3% cap (with less than 10% down). That’s real cash-to-close savings in a competitive deal.
Down payment $10,500, base loan $289,500. UFMIP of $5,066 financed into the loan → total loan balance $294,566. Monthly P&I about $1,861 at a 6.75% rate. Monthly MIP roughly $134 (0.55% annual rate). Total PITI near $2,500 after taxes and insurance.
Down payment $40,000, base loan $360,000. UFMIP $6,300 financed → $366,300 balance. Monthly P&I about $2,374. Monthly MIP roughly $153 — but it drops off after 132 months thanks to the higher down payment. Total PITI near $3,100.
Starting balance $280,000 on a $300k FHA purchase. After four years of appreciation and principal paydown, equity sits at 22%. Refinancing to conventional removes the $134/month MIP permanently — saves about $1,608 a year without changing principal and interest materially.
Example figures use illustrative rates and are for educational purposes only. Actual rates, terms, and costs depend on credit profile, market conditions, and property specifics.
FHA beats conventional on credit access (580 vs. 620) and low-down-payment flexibility. But conventional PMI is cancelable at 20% equity, while FHA MIP is permanent on low-down-payment loans. Above a 700 credit score with 10%+ down, conventional is almost always cheaper long-term.
VA is better in nearly every way for eligible borrowers — zero down, no monthly mortgage insurance, and no credit-score floor from the VA itself (lender overlays typically set ~620). FHA is relevant for veterans only when the VA funding fee would be unusually high or when entitlement has been exhausted.
USDA is zero-down but only in rural-designated areas with program income caps. FHA has no geographic limits and no income ceiling — it works anywhere.
An FHA 203(k) loan rolls the purchase price and renovation costs into a single FHA mortgage — useful if a home won’t pass standard FHA appraisal without repairs. Standard FHA requires the seller or buyer to complete repairs before closing; 203(k) lets you finance them in.
Explore the programs fha loans — 3.5% down, 580+ credit ok are most often compared against, plus the Purchase Loans hub for the full lineup and today's mortgage rates for current pricing context.
FHA loans are available to borrowers with credit scores as low as 580 for the standard 3.5% down payment option. Scores between 500 and 579 may still qualify with a 10% down payment, depending on the lender.
FHA loans require two types of mortgage insurance: an upfront premium (UFMIP) of 1.75% of the loan amount paid at closing, and an annual premium (MIP) included in your monthly payment. For most FHA loans with the minimum down payment, MIP lasts for the life of the loan.
Yes. FHA guidelines allow your entire down payment to come from gift funds provided by a family member, employer, or other approved source. A gift letter documenting the funds is typically required.
No. While FHA loans are popular with first-time buyers due to their flexible requirements, they’re available to any borrower purchasing a primary residence — whether it’s your first home or your fifth.
On a $300,000 FHA loan with minimum down, UFMIP is $5,250 (financed into the loan) and annual MIP is roughly $1,650 per year ($137/month). Over the full life of a 30-year loan, that totals tens of thousands of dollars — which is why most borrowers plan to refinance into a conventional loan once they hit 20% equity.
Yes, but the condo project must be on FHA’s approved list. You can search FHA’s condo portal before making an offer. Non-approved condos can sometimes be approved through the single-unit (spot) approval process, which is handled case by case.
FHA appraisers inspect the property for safety, soundness, and security. Common flags on older homes include peeling paint (lead-paint concern on pre-1978 homes), missing handrails on staircases, active roof leaks, exposed wiring, and non-functioning HVAC or water heaters. These repairs typically must be completed before closing unless the issue is purely cosmetic.
UFMIP is the 1.75% upfront premium paid once at closing and usually financed into the loan. MIP is the annual premium — currently 0.15% to 0.75% of the loan balance depending on LTV and term — paid monthly for either 11 years (with 10%+ down) or the life of the loan (with less than 10% down).
Yes. FHA allows 2–4 unit properties as long as you occupy one of the units as your primary residence. Rental income from the other units can sometimes help you qualify — making FHA one of the most accessible owner-occupant investment strategies available.
A streamlined refinance of an existing FHA loan into another FHA loan, with reduced documentation, no income verification in most cases, and often no new appraisal. It’s used primarily to lower the rate or switch from an ARM to a fixed rate. A Streamline does not remove MIP — for that, you need to refinance into a conventional loan.
Start by running the numbers — use the affordability calculator to size up your FHA-eligible price range with 3.5% down. Then estimate your monthly payment in the mortgage calculator with FHA upfront MIP and monthly MIP included so your PITI reflects real program costs. Not sure the timing is right? check the rent vs. buy breakeven before committing to a purchase.