FHA
Insured by the Federal Housing Administration, with more room for lower scores and higher debt ratios.
Down payment and credit
FHA allows 3.5% down with a credit score of 580 or higher, and 10% down for scores between 500 and 579. Individual lenders often set their own minimums above these.
Mortgage insurance (MIP)
Every FHA loan has an upfront premium of 1.75% of the loan amount, usually added to the loan, plus an annual premium paid monthly. If you put down less than 10%, the annual premium stays for the life of the loan; with 10% or more it ends after 11 years. Many FHA borrowers later refinance into a conventional loan once they have enough equity to drop mortgage insurance.
When FHA makes sense
- Credit scores in the 580s and 600s
- Debt-to-income ratios that are too high for conventional
- Gift funds from family for the down payment
- A recent credit event that has had time to season
Limits
FHA sets county loan limits and requires the home to be your primary residence. The appraisal also checks minimum property standards, so homes needing major repairs can be a problem.
Reviewed by Mustafa Temiz, CPA, NMLS #2450795 · Updated November 2026
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