Overview
FHA loans are insured by the Federal Housing Administration and designed for buyers with lower credit scores or limited savings. With as little as 3.5% down and credit scores starting at 580, FHA loans are the most accessible conventional mortgage option. The trade-off is mandatory mortgage insurance premium (MIP) for the life of the loan (if you put less than 10% down), which adds to monthly costs. FHA loans have maximum limits that vary by county.
Min. Down
3.5%
Min. Credit
500
Term
15 or 30 yr
PMI
Yes*
Best For
- First-time homebuyers
- Buyers with lower credit scores (500-619)
- Buyers with limited savings
- Those recovering from bankruptcy or foreclosure
Pros
- Low 3.5% down payment
- Credit scores as low as 500 accepted
- Flexible debt-to-income ratios
- Seller can contribute up to 6% closing costs
- Available after 1-2 years post-bankruptcy
Cons
- Mandatory upfront MIP (1.75% of loan)
- Annual MIP for life of loan if <10% down
- Loan limits cap purchase price
- Property must meet FHA condition standards
- Some sellers prefer conventional offers
Requirements
- Minimum 580 credit score for 3.5% down
- 500-579 credit requires 10% down
- Maximum 43-50% debt-to-income ratio
- Primary residence only
- FHA appraisal required
- Property must meet HUD standards