FHA loans are insured by the Federal Housing Administration, which lets lenders approve buyers with lower credit scores and smaller down payments. They're only for homes you'll live in, and they come with mortgage insurance.
Credit Score and Down Payment
Under FHA rules, borrowers with a credit score of 580 or higher can put down 3.5%. Scores from 500 to 579 require 10% down. Many lenders set their own minimums above FHA's, often around 580 to 620.
Mortgage Insurance
- Upfront premium: 1.75% of the loan, usually added to the loan balance
- Annual premium: paid monthly. With less than 10% down, it generally lasts for the life of the loan. With 10% or more down, it generally ends after 11 years.
Many FHA borrowers later refinance into a conventional loan to drop mortgage insurance once they have enough equity.
Other Requirements
- Primary residence: you must move in within 60 days and live there
- Debt-to-income: can exceed conventional limits with an automated approval
- Loan limits: set by county each year
- Property condition: the FHA appraisal checks safety and livability
- Waiting periods: after bankruptcy or foreclosure, shorter than many conventional rules
FHA vs. Conventional
| FHA | Conventional | |
|---|---|---|
| Credit flexibility | More flexible | Stricter |
| Mortgage insurance | Upfront plus annual, often permanent | PMI below 20% down, removable |
| Occupancy | Primary residence only | Primary, second home, investment |
| Best for | Lower scores or higher DTI | Stronger credit |
With a credit score in the 700s, conventional is often cheaper. Below that, FHA may win. I'll price both side by side.
Gifts and Assistance
FHA allows the entire down payment to come from a gift from family or an approved source, and it works with many down payment assistance programs.
FHA Loan FAQ
What credit score do I need for an FHA loan?
FHA allows 580+ with 3.5% down and 500–579 with 10% down, but many lenders set higher minimums.
How long does FHA mortgage insurance last?
With less than 10% down, generally for the life of the loan. With 10% or more down, generally 11 years.
Can I use an FHA loan for an investment property?
No, but you can buy a 2–4 unit property and live in one unit.
In the financial industry since 2015. Licensed loan officer in Los Angeles, California. NMLS #1493724, with UTM Financial, LLC (NMLS #2591548). More about Ivan
This article is general education, not financial, tax, or legal advice. Loan guidelines vary by lender and change often. Not a commitment to lend.