FHA Loans

One-line summary: Government-insured loans designed for borrowers who need lower down payments and more flexible credit qualifying than conventional financing requires, popular for first-time buyers and for borrowers rebuilding credit.

Best for

First-time homebuyers, borrowers with credit scores below conventional minimums, and buyers who don’t have a 20% down payment saved. Also useful for borrowers with higher debt-to-income ratios who don’t qualify for conventional financing at the same purchase price.

Key terms (typical)

Attribute	Typical Range
Eligible properties	1–4 unit primary residences
Down payment	As low as 3.5% with an established 580+ credit score
Credit score	580 minimum (some lenders 600+); below 580 may require 10% down
Loan limits	Vary by county, ranging from a floor of $541,287 up to a ceiling of $813,050 in major Texas metropolitan counties
Mortgage insurance	Upfront MIP (1.75% financed into the loan balance) plus annual MIP for the life of the loan on standard 30-year terms
Term	15 or 30 years fixed; some ARM options
Debt-to-income	Up to 50% or higher with compensating factors
Property condition	FHA appraisal requires the home meet minimum property standards

Why borrowers choose this program

• Low down payment. 3.5% down means a $300,000 home can be bought with $10,500 down, substantially less than conventional’s typical 5–20%.
• Flexible credit qualifying. FHA accepts credit scores down to 580 (sometimes lower with compensating factors), opening the door for borrowers who don’t fit conventional credit boxes.
• Gift funds allowed. The entire down payment can come from gift funds from a family member, employer, or approved source.
• Assumable. FHA loans can be assumed by a qualified buyer, useful if rates have risen by the time you sell.

Considerations

• Mortgage insurance is permanent on most loans. Unlike conventional PMI, FHA’s annual MIP typically stays for the life of the loan (or 11 years if you put 10%+ down). Many FHA borrowers refinance into conventional once they have 20% equity to drop the MIP.
• Property must meet FHA standards. Homes with significant deferred maintenance, structural issues, or safety hazards won’t pass FHA appraisal. For fixer-uppers, the FHA 203(k) renovation loan exists for this exact reason.
• Loan limits cap proceeds. FHA loan limits vary by county and are below conventional jumbo limits in many areas. For higher-priced homes, conventional or jumbo financing may be required.