FHA Loans
FHA loans require as little as 3.5% down and accept credit scores as low as 580. Backed by the Federal Housing Administration, these loans help first-time buyers and those with limited savings achieve homeownership through easier qualification standards and flexible debt-to-income requirements up to 50%.
What is an FHA Loan?
FHA stands for the Federal Housing Administration. The FHA was created to help increase home-ownership in the United States by encouraging lenders to lend to more people who were traditionally considered higher risk borrowers. FHA encourages lenders to do this by requiring a mortgage insurance premium on nearly every loan.
FHA then takes those premiums and pools them together. If a borrower defaults, the pool pays out to the lender to help cover any losses. Its a win-win situation for everyone! The lender is protected, good borrowers who were previously boxed out of loans have easier times qualifying, and home ownership rates in the country have an opportunity to improve.
We offer FHA purchase loans, FHA refinance loans, FHA streamline refinance loans, and FHA cash-out refinance loans.
People Also Ask
Can I get an FHA loan with bad credit?
Yes. FHA loans accept credit scores as low as 500 with 10% down, or 580 with just 3.5% down. Even recent bankruptcies or foreclosures may qualify after 2-3 years with rebuilt credit.
How much are FHA closing costs?
FHA closing costs typically range from 2-5% of the loan amount. The good news: sellers can contribute up to 6% toward your closing costs, and you can roll the 1.75% upfront mortgage insurance premium into your loan.
Is FHA only for first-time buyers?
No. This is a common myth. Anyone who meets FHA requirements can get an FHA loan, regardless of how many homes they've purchased before. You can even have multiple FHA loans in certain situations.
Can I remove FHA mortgage insurance?
For loans after June 2013 with less than 10% down, FHA mortgage insurance is required for the life of the loan. With 10%+ down, it can be removed after 11 years. Consider refinancing to conventional once you reach 20% equity.
FHA Loan Key Terms
- MIP (Mortgage Insurance Premium)
- Insurance FHA borrowers pay to protect lenders. Includes upfront MIP (1.75% of loan amount) and annual MIP (0.45-1.05% depending on down payment and loan term).
- LTV (Loan-to-Value Ratio)
- The percentage of your home's value that you're borrowing. FHA allows up to 96.5% LTV for purchases (3.5% down) and 97.75% LTV for refinances.
- DTI (Debt-to-Income Ratio)
- Your total monthly debt payments divided by your gross monthly income. FHA allows DTI ratios up to 50% in some cases, higher than most conventional loans.
- Upfront MIP
- A one-time 1.75% mortgage insurance premium charged at closing. This can be rolled into your loan amount, meaning you don't pay it out of pocket.
- Annual MIP
- Ongoing mortgage insurance paid monthly, ranging from 0.45% to 1.05% of your loan balance annually. The rate depends on your loan term, amount, and down payment.
What are the Benefits of an FHA Loan?
- Less stringent qualification and credit requirements
- Very low home equity requirements
- Only 3.5% Down Payment Required for Purchases
- Fast and Easy Streamline Refinance available if you already have an FHA loan
Who Qualifies for an FHA Loan?
- Lower credit score requirements or even no credit score required
- Refinance up to 97.75% of your primary home's value
- Buy a home with as little as 3.5% down (primary home)
How Does an FHA Loan Work?
- Your actual payment will vary based on your situation and the current interest rates when you apply
- Prepay your mortgage at any time without pre-payment penalties
- 30-, 25-, 20- and 15-year terms are all available with fixed rates
- 5-year adjustable-rate mortgage available
FHA Loans vs Conventional Loans
Which loan type is right for you?
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Down Payment | ✓ 3.5% (credit 580+) | 5-20% typically required |
| Credit Score | ✓ As low as 500 | Typically 620+ required |
| Mortgage Insurance | Required for life of loan | ✓ Removable at 20% equity |
| Debt-to-Income Ratio | ✓ Up to 50% allowed | Usually max 43-45% |
| Loan Limits | Varies by county ($498k-$1.1M) | ✓ Higher conforming limits |
| Interest Rates | Competitive rates | ✓ May be slightly lower |
| Property Standards | Must meet FHA requirements | More flexible |
| Best For | First-time buyers, lower credit scores | Strong credit, larger down payment |
Not sure which loan is right for you? Our FHA specialists can help you compare your options and find the best mortgage solution for your situation.
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