FHA LOANS

FHA LOANS - Family obtaining an FHA mortgage home loan to buy their first home

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
Equal Housing Lender