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.
Have questions about your situation?
Ark Beacon can answer questions and match you with a vetted lender in about 60 seconds.
Start Your VoyageKeep reading
VA Loans Explained
VA loans offer zero down payment, no PMI, and competitive rates for eligible service members and veterans. Learn qualification rules and how to get matched.
Read article Loan TypesConventional Loans Explained
Conventional loans are the most common mortgage type. Learn credit and down payment requirements, PMI rules, conforming limits, and how to compare offers.
Read article Loan TypesHELOCs Explained
A HELOC lets you borrow against home equity like a revolving credit line. Learn how draw and repayment periods work, variable rates, costs, and typical use cases.
Read article