FHA Loans Explained
FHA loans are mortgages insured by the Federal Housing Administration. They were designed to make homeownership accessible to buyers with smaller down payments or less-than-perfect credit.
Who qualifies
Minimum credit score of 580 for the 3.5% down payment program. Scores between 500–579 may qualify with 10% down.
Debt-to-income ratio typically up to 43%, though some lenders allow higher with compensating factors.
The home must be your primary residence and meet FHA property standards.
The mortgage insurance trade-off
FHA loans require two forms of mortgage insurance: an upfront premium (1.75% of the loan) and an annual premium (0.15–0.75% per year, paid monthly).
On most modern FHA loans with less than 10% down, mortgage insurance lasts the life of the loan. To remove it, you typically need to refinance into a conventional loan once you have 20% equity.
When FHA is the right choice
You have a credit score in the 580–680 range and can't comfortably qualify for conventional financing.
Your down payment is between 3.5% and 10%.
You plan to refinance within a few years once your credit and equity improve.
Key takeaways
- Great entry point for buyers with lower credit or smaller down payments.
- Mortgage insurance is the cost — usually for the life of the loan.
- Many FHA borrowers refinance to conventional once they hit 20% equity.
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