Federal Housing Administration Loan
An FHA loan is insured by the Federal Housing Administration, which means if a borrower defaults, the FHA covers the lender’s loss. That government backing allows lenders to offer more flexible qualifying terms and lower down payments than most conventional loans.
FHA loans are a popular choice for first-time buyers, buyers with limited savings, or buyers who have had past credit challenges. The minimum down payment is just 3.5% for borrowers with a credit score of 580 or higher. Borrowers with scores between 500 and 579 may still qualify with a 10% down payment.
Who Can Get an FHA Loan?
FHA loans have no income limits, but there are county-by-county limits on how much you can borrow. Loan limits are set each year by HUD based on median home prices in each area. To qualify, you will need a reasonable debt-to-income ratio and a steady employment history. Unlike conventional loans, FHA guidelines are designed to give more buyers a path to homeownership.
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3.5% down payment for borrowers with a 580+ credit score
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Gift funds can cover the entire down payment and closing costs
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Can qualify 2 years after a bankruptcy discharge
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Can qualify 3 years after a foreclosure
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No prepayment penalty
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Home improvement financing available through the FHA 203(k) program