FHA Loan

Updated: July 12, 2026 Reviewed by WikEst Finance Team

Government-insured loan with low down payment (3.5%); flexible credit requirements.

Key Takeaways

Low down payment: 3.5% of purchase price for borrowers with credit score ≥580
Insured by the Federal Housing Administration (FHA)
Flexible credit requirements - easier to qualify than conventional loans
Mortgage insurance premium (MIP) required for the life of the loan (with <10% down)

What is an FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD). These loans are designed to help first-time homebuyers and those with lower credit scores or limited down payment savings achieve homeownership.

FHA loans are popular because they offer more flexible qualification requirements compared to conventional loans. Even if you don't have perfect credit or a large down payment, you may still qualify for an FHA loan.

Source: HUD - FHA Loans

Key Features of FHA Loans

Low Down Payment

One of the biggest advantages of an FHA loan is the low down payment requirement. Borrowers with a credit score of 580 or higher can put down just 3.5% of the purchase price. Let's say, on a $200,000 home, that's only $7,000 down.

If your credit score is between 500-579, you may still qualify but will need a 10% down payment.

Flexible Credit Requirements

FHA loans are more lenient when it comes to credit scores. The minimum credit score is typically 580 for the 3.5% down payment option, but some lenders may approve borrowers with scores as low as 500.

Mortgage Insurance

All FHA loans require mortgage insurance premium (MIP), which protects the lender in case of default. There are two types:

Upfront Mortgage Insurance Premium (UFMIP): 1.75% of the loan amount, typically added to the loan balance
Annual Mortgage Insurance Premium (MIP): 0.45%-1.05% annually, paid monthly

If you put down less than 10%, MIP is typically paid for the entire loan term. With 10% or more down, MIP is removed after 11 years.

Eligibility Requirements

Credit score of at least 580 (for 3.5% down) or 500 (for 10% down)
Debt-to-income ratio (DTI) typically ≤43%
Must occupy the property as your primary residence
Steady employment history (typically 2 years)
Sufficient income to cover monthly payments

FHA Loan Limits

FHA loan limits vary by county and are updated annually. For most areas in 2024, the limit is $498,257 for a single-family home. In high-cost areas, the limit can be higher.

Source: HUD - FHA Loan Limits

Pros and Cons of FHA Loans

Pros

Low down payment requirement
Flexible credit requirements
Lower credit score minimum than conventional loans
Can be used for purchase or refinance
Allows gift funds for down payment

Cons

Mortgage insurance required (adds to monthly payment)
Loan limits may not be enough for expensive areas
Only for primary residences
Property must meet FHA appraisal standards

Calculating Your FHA Mortgage Payment

Want to estimate your monthly FHA mortgage payment? Use our mortgage calculator to see how much you could afford:

AllMoneyCalc - FHA Mortgage Calculator

Frequently Asked Questions

Minimum credit score is typically 580 for the 3.5% down payment option. Borrowers with scores between 500-579 may qualify with a 10% down payment. Some lenders may require higher scores.

If your down payment is less than 10%, MIP is paid for the life of the loan. With 10% or more down, MIP is removed after 11 years. The upfront premium is always added to the loan amount.

No, FHA loans are for primary residences only. You must live in the home as your main residence.

Yes, you can refinance an FHA loan through an FHA Streamline Refinance, which has simplified documentation requirements and lower closing costs compared to a traditional refinance.

Related Glossary Terms

This content is for informational and educational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified professional for advice specific to your situation.