An FHA loan is a type of mortgage that is insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD). FHA loans are designed to help low- and moderate-income borrowers who may not have enough savings or good credit to qualify for conventional loans. FHA loans offer several benefits, such as:

• A low down payment requirement of as little as 3.5% of the purchase price
• Flexible credit and income requirements
• Lower interest rates than conventional loans
• The ability to finance closing costs, repairs, or renovations into the loan amount
• The option to refinance into a lower rate or term without an appraisal

However, FHA loans also have some drawbacks, such as:

• A limit on the loan amount, which varies by county and state
• A mortgage insurance premium (MIP) that must be paid upfront and annually, regardless of the loan-to-value ratio
• A higher debt-to-income ratio than conventional loans, which may affect your ability to qualify for other loans or credit cards
• A longer waiting period after a bankruptcy, foreclosure, or short sale than conventional loans

To qualify for an FHA loan, you must meet the following criteria:

• Have a minimum credit score of 580 for a 3.5% down payment, or 500 for a 10% down payment
• Have a steady income and employment history
• Have a debt-to-income ratio of less than 43%, or up to 50% with compensating factors
• Have a property that meets the FHA’s minimum standards and appraisal guidelines
• Occupy the property as your primary residence