FHA Loans
Insured by the Federal Housing Administration. Flexible credit standards.
FHA loans are insured by the Federal Housing Administration, part of HUD. The insurance lets lenders accept a lower down payment and more flexible credit, in exchange for mortgage insurance premiums.
Who may qualify for an FHA loan
FHA loans are open to first-time and repeat buyers who will live in the home. They’re often considered by buyers with smaller down payments, credit scores below conventional sweet spots, or higher debt-to-income ratios, though every file is reviewed individually.
- At least one borrower must occupy the property within 60 days and intend to live there at least one year (HUD 4000.1).
- The loan amount must fit within FHA’s county limit. Check yours with HUD’s FHA mortgage limits lookup.
- Income must be stable and documentable; FHA reviews credit history, not just the score.
How down payments work
FHA’s minimum required investment depends on your credit score (HUD):
- 580 or higher: 3.5% down.
- 500 to 579: 10% down.
- Below 500: not eligible for FHA financing.
FHA allows gifts from a defined list of donors, and sellers or other interested parties can contribute up to 6% of the sales price toward closing costs and certain other expenses (HUD 4000.1).
Credit and income considerations
FHA looks at the full credit picture, including payment history, collections, and how past credit events were resolved. FHA has specific waiting periods after events like bankruptcy and foreclosure; ask Shane how they apply to your timeline.
Lenders may apply their own requirements (“overlays”) above FHA’s minimums, so the published minimum isn’t a guarantee of approval.
Mortgage insurance or funding fees
FHA charges two premiums (HUD Mortgagee Letter 2023-05):
- Upfront MIP: 1.75% of the base loan amount, usually financed into the loan.
- Annual MIP: paid monthly. The rate depends on the loan term, loan amount, and LTV.
- How long it lasts: with an LTV above 90% (less than 10% down), annual MIP generally lasts for the mortgage term. With 10% or more down, it generally lasts 11 years.
Removing FHA MIP early usually means refinancing into a different loan, which depends on rates, equity, and your situation at the time.
Key advantages
- 3.5% down with a 580+ score.
- Credit flexibility that can help buyers rebuilding credit.
- Gift funds from eligible donors and up to 6% in interested-party contributions.
- Can be used for 2–4 unit homes if you live in one unit.
- FHA 203(k) adds renovation financing (see the renovation guide).
Important limitations and risks
- Annual MIP usually lasts for the life of the loan with less than 10% down.
- The 1.75% upfront premium adds to the loan balance when financed.
- County loan limits can be lower than conventional limits.
- The home must meet FHA minimum property requirements, which can complicate homes that need repairs.
- Primary residence only.
Common misconceptions
MythFHA is only for first-time buyers.
RealityThere is no first-time-buyer requirement. Repeat buyers can use FHA for a home they’ll live in.
MythFHA always costs less than conventional.
RealityNot necessarily. Upfront and lifetime MIP can make FHA more expensive over time for some borrowers. Compare the full cost.
MythFHA can’t be used for a duplex.
RealityFHA allows 1–4 unit properties as long as you live in one of the units.
Questions to ask before choosing
- How does FHA compare with conventional for my score and down payment over 5 and 10 years?
- How much would upfront and annual MIP add to my loan and payment?
- What is the FHA loan limit for the county I’m shopping in?
- Does the lender apply any credit or debt-to-income overlays above FHA minimums?
- Could the home I’m considering have condition issues under FHA standards?
Compare FHA with another option.
Open the comparison tool with FHA already selected, or browse all ten guides.
Keep comparing.
Conventional Mortgages
Not government-insured. Usually follows Fannie Mae or Freddie Mac guidelines.
Read the guide →Specialized financingRenovation Financing: HomeStyle & FHA 203(k)
Finance the purchase (or refinance) and the renovation in one loan.
Read the guide →Loan typesVA Home Loans
Guaranteed by the U.S. Department of Veterans Affairs for eligible service members, veterans, and surviving spouses.
Read the guide → All guidesMortgage Programs Center
All ten guides and the side-by-side comparison tool.
Compare programs →FHA questions, answered.
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Ask Shane a question →What credit score do I need for an FHA loan?
FHA’s minimums are 580 for the 3.5% down payment and 500 to 579 with 10% down. Lenders can set higher minimums.
How much is FHA mortgage insurance?
FHA charges an upfront premium of 1.75% of the base loan amount, usually financed, plus an annual premium paid monthly that depends on the loan term, amount, and LTV. HUD publishes the current rates.
Does FHA mortgage insurance ever go away?
With 10% or more down, annual MIP generally lasts 11 years. With less than 10% down, it generally lasts for the mortgage term unless you refinance into another loan.
Can I use an FHA loan for a duplex or fourplex?
Yes. FHA allows 1–4 unit properties when at least one borrower lives in one of the units as a primary residence.
Are FHA loans only for first-time buyers?
No. FHA has no first-time-buyer requirement; the home must be your primary residence.
What are FHA loan limits in Michigan?
FHA limits are set by county. Use HUD’s FHA mortgage limits lookup to find the current limit for the county you’re buying in.
Sources
- HUD Handbook 4000.1: FHA Single Family Housing Policy Handbook (gifts, interested party contributions, secondary financing, MIP)
- HUD 4155.1: FHA minimum credit score and maximum financing
- HUD Mortgagee Letter 2023-05: FHA upfront and annual MIP (rates and duration)
- HUD: FHA mortgage limits lookup by county
- CFPB: Understand the different kinds of loans available
- CFPB: What is mortgage insurance and how does it work?
Important: This page is educational and general in nature. It isn’t a recommendation, a loan offer, a rate quote, a Loan Estimate, an approval, or a determination of eligibility. Program guidelines, limits, fees, and availability change and vary by lender and investor; actual eligibility, pricing, and terms require a full application and review. References to a program don’t mean Ease Mortgage currently offers it; ask Shane about current availability. Information was last reviewed November 9, 2026. Shane Thomas, Senior Loan Officer | Ease Mortgage, NMLS #444451. Ease Mortgage NMLS #2273319. Licensed in Michigan and Indiana. Equal Housing Opportunity.
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