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House Viewing

FHA Loans

An FHA loan is a government-backed mortgage with looser financial requirements that can allow you to buy a home. You may qualify for an FHA loan if you have debt or a lower credit score. You might even be able to get an FHA loan with a bankruptcy or other financial issue on your record.

FHA loans are backed by the Federal Housing Administration (FHA), an agency under the jurisdiction of the Department of Housing and Urban Development (HUD). FHA loans are insured by the FHA, which simply means that the owners of your mortgage are protected against loss.

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As Little As 3.5% Down

An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher. If you can make a 10% down payment, your credit score can be in the 500 – 579 range. A mortgage calculator can help you estimate your monthly payments, and you can also see how your down payment amount affects them.

Private Mortgage Insurance

You’ll pay a mortgage insurance premium (MIP) for all FHA loans. Mortgage insurance is put into place to protect the FHA against losses if you default on your loan.

In most cases, you pay mortgage insurance for the life of an FHA loan (unless you made a down payment of at least 10%, in which case, MIP would be on the loan for the first 11 years). FHA loan mortgage insurance is assessed in a couple of different ways. First, an upfront mortgage premium is charged, which normally amounts to 1.75% of your base loan amount.

FHA borrowers also pay an annual mortgage insurance premium, which is based on the term (length) of your mortgage, your loan-to-value (LTV) ratio, your total mortgage amount and the size of your down payment. Annual MIP payments run approximately 0.15% – 0.75% of the base loan amount.

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Loan Size

According to the Department of Housing and Urban Development, the maximum FHA lending amount for high-cost areas (such as large metropolitan areas) is up to $1,089,300 for 2023 In lower-cost areas, the FHA limit is Loan limits are set based on county property values. These are the limits for one-unit properties. If you have multiple units, limits may be higher.


You can look up the FHA mortgage limits for one or more areas on the FHA mortgage limits page. The page also includes a median sale price value for each area. Those are the median price estimates used for loan limit determination, according to HUD.

Credit Score & DTI

FHA states that your monthly mortgage payment should be no more than 31% of your monthly gross income, and that your DTI should not exceed 43% of monthly gross income. If you have a higher credit score, you may be able to qualify with a higher DTI.

An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher. If you can make a 10% down payment, your credit score can be in the 500 – 579 range.

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Is An FHA Loan Right For You?

If you’re still debating the pros and cons of an FHA loan compared to a conventional loan, you should know that a conventional loan is not government-backed. Conventional loans are offered through Fannie Mae or Freddie Mac, which are government-sponsored enterprises that provide mortgage funds to lenders.


Here are a few of the main factors to consider when deciding whether or not to take out an FHA loan.

Stricter Requirements

Conventional loans have more stringent requirements, so keep in mind that you’ll need a higher credit score and a lower DTI to qualify. FHA loans, on the other hand, are nonconforming loans, meaning they don’t satisfy Fannie Mae or Freddie Mac’s requirements for purchase.

Closing Costs

Regardless of whether you choose a conventional or FHA loan, there are a few other costs to be aware of. You'll have to pay closing costs, which are the fees associated with processing and securing your loan. These can vary depending on the price of the house and the type of mortgage, but you should budget about 3% – 6% of your home’s value.

Home Maintenance Costs

You should also budget 1% – 3% of your purchase price for maintenance. The exact percentage is going to depend on the age of the house. If your house is newer, odds are fewer things are likely to break right away. Meanwhile, if the house is on the older end, you may need to set aside more. Finally, if you live in an area with homeowners association fees, you’ll end up paying for those on a monthly or yearly basis.


Still looking to learn more about FHA loans? Here are the answers to a few of the most frequently asked questions.

Is an FHA loan right for me?

An FHA loan might be the right loan option for you if you’re having trouble getting a loan due to your financial history or if you’re a first-time home buyer. However, it’s always important to weigh the pros and cons of any loan option before you fully commit to one. Make sure you’re aware of all other costs associated with FHA loans and that you’re financially prepared to pay them.

How do I apply for an FHA loan?

Once you choose the mortgage lender you’d like to work with, you can start applying for an FHA loan. Once you provide all of the necessary personal and financial documents (tax returns, pay stubs, bank statements, etc.) to your lender, they will submit your application and work on a loan estimate.

Who qualifies for an FHA loan?

As with every loan, there are certain requirements borrowers must meet to qualify for an FHA loan. Borrowers must prove that they have a steady employment history by showing pay stubs, W-2s, federal tax returns and bank statements. Borrowers also need to follow these requirements as well:

  • The home must be appraised by an FHA-approved appraiser.

  • The home has to be a primary residence.

  • You must occupy the property within 60 days of closing.

  • An FHA inspection is required, and the inspection must report whether the property meets minimum property standards.

There are also a few more specific conditions to qualify, including a down payment amount, mortgage insurance, credit score, loan limits and income requirements.


An FHA loan provides a government-insured loan with flexible loan options. Even experienced homeowners may need to plan for a long time for a new home purchase. Fortunately, FHA loans may help some buyers get into the home of their dreams with a lower down payment.

What is an FHA loan?

FHA loans are mortgages backed by the U.S. Federal Housing Administration. Lenders, such as banks and credit unions, that provide FHA loans provide funding for home purchases while requiring a lower down payment. Buyers may get into a new home with as little as 3.5% down.

Using conventional loans, a lower down payment requires the borrower to get private mortgage insurance. This special type of insurance protects the lender just in case the borrower is not able to pay. The cost of PMI is added to the monthly payment until the amount of the loan reaches 20%. FHA loans, on the other hand, do not require PMI because they are backed by the U.S. government. Additional scrutiny is often required during the loan application process using an FHA loan.

What is required for an FHA loan?

Many of the same documents are required for an FHA loan that any potential lender will want to see: employment history, appraisal, debt-to-income ration. A few additional stipulations are also attached to the FHA loan process. Buyers may have to bring 3.5% of the purchase price as a down payment, more if they have a credit score below 580. FHA loans are only available for the borrower’s primary residence.

Credit requirements may also be lower for FHA loans, given other factors demonstrate that the borrower is able to manage their money responsibly. Each lender looks at individual applications and may ask for additional documentation or explanations. They are often able to work with buyers with a lower credit score or shorter credit history than in other situations.

How FHA Loans Work

  • Purchase your home with as little as 3.5% down payment (compared to 20% required on most loans).

  • 30-, 25-, 20- and 15-year terms are all available with fixed rates.

  • 5-year adjustable rate mortgage available.

  • Pay your mortgage off at any time without pre-payment penalties.

Have questions?  Give us a call!  One of our mortgage specialists would be happy to answer all of your questions.

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