FHA loans are designed for borrowers with lower credit scores or smaller down payments, with as little as 3.5% down (or 10% down with a credit score under 580).
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Frequently Asked Questions
What are FHA loan requirements?
Minimum 580 credit score (3.5% down) or 500-579 score (10% down). Maximum debt-to-income ratio for manually underwritten loans is 43%, or up to 50% with compensating factors (HUD Handbook 4000.1); automated approvals can go higher. Down payment: 3.5% minimum. Must be a primary residence, not investment property.
How much does FHA mortgage insurance cost?
Upfront mortgage insurance premium (UFMIP): 1.75% of loan amount, added to the loan balance. Annual mortgage insurance premium (MIP): 0.55% for loans with loan-to-value over 95% (most FHA loans) and 0.50% at 95% or below (HUD Mortgagee Letter 2023-05). MIP stays for the life of the loan when less than 10% is put down, and for 11 years with 10% or more down (unlike conventional PMI, which can be removed at 20% equity).
What's the difference between FHA and conventional loans?
FHA accepts lower credit (580 vs 620+), allows smaller down payments (3.5% vs 5%), but charges permanent mortgage insurance. Conventional loans build equity faster and shed PMI when you reach 20% equity. FHA is better for first-time buyers; conventional is better long-term if you can afford it.
Can I get an FHA loan with bad credit?
Yes — FHA minimum is 580. Some lenders accept 500-580 with compensating factors (large down payment, cash reserves, stable income). Your rate will be higher than someone with 700+ credit, but approval is possible.
Who offers FHA loans in my city?
All major lenders (Bank of America, Wells Fargo, Rocket Mortgage, Better.com, etc.) offer FHA loans. Local credit unions often have competitive FHA rates. Get quotes from 2-3 FHA-approved lenders to compare.
