What Is An FHA Loans?

FHA Loans

If you’re struggling to save up a down payment for a conventional loan, then an FHA loan may be for you. FHA loans make buying a home easier for first time home buyers and people who have a hard time getting approved for a conventional loan by providing looser guidelines such as

  • Minimized credit qualifications
  • Lower down payment requirements
  • Cheaper closing costs

How do FHA Loans Work?

The Federal Housing Association is part of the US Department of Housing and Urban Development. To get this type of loan you must work with an FHA-approved Lender. The FHA then provides a guarantee on the loan so that if you default the lender won’t lose money. If you default on the house, your lender will repossess the house and the FHA will pay the lender the remaining balance of the loan in exchange for the house.

See our FHA Loan Programs

How to Qualify for an FHA Loan

FHA loan guidelines aren’t as strict as for conventional loans. Here are some of the basic qualifications:

  • A 3.5% down payment if your credit score is above 580
  • A 10% down payment if your credit score is between 500 and 579
  • Required payment of upfront and annual mortgage insurance premium (MIP)

Pros and Cons of an FHA Loan


  • Low credit score requirement – You can qualify for an FHA loan with a credit score as low as 500 (depending on how much you put down)
  • Down Payments can be as low as 3.5% – You can get an FHA loan with as little as 3.5% down. The FHA will also accept a down payment from elsewhere like assistance from a charitable organization or a bank
  • Cash for home repairs – If you’re planning on purchasing a home that needs repairs, a special Section 203(k) program lets you combine the purchase of the home and the cost of renovations into a single mortgage.
  • Assistance to avoid foreclosure – If you’re struggling to make payments on an FHA loan, they offer a special forbearance period that can reduce or suspend your mortgage payment for up to a year


  • Upfront MIP – To protect the lender from a loss if you default, the FHA requires that you pay an upfront mortgage insurance premium. The fee is due at closing and costs 1.75% of the total FHA loan.
  • Annual MIP – In addition to upfront MIP the FHA requires that you pay annual MIP for the entire life of the loan if your down payment is less than 10%, 11 years if more than 10%. The fee is collected every month with your mortgage payment and can range between .45% and 1.05% depending on factors such as the loan amount and term.

An FHA loan gets you into a house with as little upfront money as possible, but keep in mind what might happen should an emergency come up. Long term, the extra fees you have to pay for the MIP and the amount in total interest can make FHA loans way more expensive than conventional loans.

Apply for an FHA Loan Now

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