What is an FHA Home Loan?
An FHA home loan is a government-backed mortgage insured by the Federal Housing Administration (FHA). It’s designed to help first-time buyers, those with lower credit scores, or those with limited savings qualify for a mortgage.
Because it’s backed by the government, lenders take on less risk—making it easier for more people to qualify.
FHA Home Loan Requirements
- Credit Score: Minimum of 580 for 3.5% down (500–579 may qualify with 10% down)
- Down Payment: At least 3.5% of the home’s purchase price
- Steady Income & Employment: Proof of reliable income for the past 2 years
- Debt-to-Income Ratio (DTI): Generally below 43%, sometimes allowed up to 50%
- Property Must Be Primary Residence: FHA loans are for owner-occupied homes only
- Mortgage Insurance: Required both upfront (UFMIP) and monthly (MIP)
Why Choose an FHA Loan?
- Easier to qualify than conventional loans
- Lower credit scores accepted
- Lower down payment requirements
- Great for first-time homebuyers
- More flexible on past credit issues (like bankruptcy or foreclosure)
Down Payment Options for FHA Loans
- 3.5% down: With a credit score of 580 or higher
- 10% down: If your credit score is between 500–579
- Gift funds: Down payment and closing costs can be gifted by family or eligible sources
Types of FHA Home Loans
- FHA Purchase Loan: Standard loan to buy a home with a low down payment
- FHA Refinance Loan: Refinance an existing FHA or conventional mortgage into better terms
- FHA 203(k) Renovation Loan: Combines the cost of buying and renovating a home into one loan
- FHA Streamline Refinance: Simplified refinance process for current FHA borrowers
- FHA Energy Efficient Mortgage (EEM): Helps finance energy-saving upgrades with your FHA loan
Benefits of FHA Home Loans
- Low Down Payment Requirements
- Easier Credit Qualifications
- More Lenient on Credit History
- Allows Gift Funds and Seller Contributions
- Fixed and Adjustable-Rate Options
