Frequently Asked Questions

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD). These loans are designed to help low-to-moderate income borrowers who have lower credit scores or smaller down payments qualify for a mortgage.

FHA loans are issued by FHA-approved lenders, not by the FHA itself. The FHA provides insurance to lenders, which protects them against losses if borrowers default on their loans. This insurance allows lenders to offer more favorable terms to borrowers who might not qualify for conventional loans.

FHA loans and conventional loans differ in several key ways:

• Credit Requirements: FHA loans have more lenient credit requirements (minimum 500-580) compared to conventional loans (typically 620+).
• Down Payment: FHA loans require as little as 3.5% down with a credit score of 580+, while conventional loans typically require 3-5% down with excellent credit, or more with lower credit scores.
• Mortgage Insurance: FHA loans require both an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP) for the life of the loan in most cases. Conventional loans require private mortgage insurance (PMI) only if the down payment is less than 20%, and PMI can be removed once you reach 20% equity.
• Loan Limits: FHA loans have specific loan limits that vary by county, while conventional loans follow conforming loan limits set by Fannie Mae and Freddie Mac.
• Property Standards: FHA loans have stricter property requirements to ensure the home meets minimum safety and habitability standards.

FHA loans offer several advantages, especially for first-time homebuyers and those with limited financial resources:

• Lower Credit Score Requirements: You may qualify with a credit score as low as 500 (with 10% down) or 580 (with 3.5% down).
• Smaller Down Payment: The minimum down payment is just 3.5% with a credit score of 580 or higher.
• Higher Debt-to-Income Ratio: FHA loans may allow higher debt-to-income ratios (up to 43% or even higher with compensating factors) compared to conventional loans.
• Gift Funds Allowed: The entire down payment can come from gift funds from family members, employers, or approved organizations.
• Seller Concessions: Sellers can contribute up to 6% of the purchase price toward the buyer's closing costs.
• Assumable Loans: FHA loans are assumable, meaning a future buyer may be able to take over your loan with its existing interest rate and remaining balance.

While FHA loans offer many benefits, they also have some disadvantages to consider:

• Mortgage Insurance: FHA loans require both an upfront mortgage insurance premium (1.75% of the loan amount) and an annual mortgage insurance premium (0.15% to 0.75% of the loan amount) for the life of the loan in most cases.
• Property Standards: FHA loans have stricter property requirements, which may limit your options or require repairs before closing.
• Loan Limits: FHA loans have maximum loan amounts that vary by county, which may be lower than what you need in high-cost areas.
• Primary Residence Only: FHA loans are generally only available for primary residences, not investment properties or vacation homes.
• Potentially Higher Costs: The total cost of an FHA loan over its lifetime may be higher than a conventional loan due to the ongoing mortgage insurance premiums.

FHA loans can be used for various property types, but with some limitations:

• Single-Family Homes: These are the most common properties financed with FHA loans.
• Multi-Unit Properties (2-4 units): You can use an FHA loan to purchase a duplex, triplex, or fourplex, provided you live in one of the units as your primary residence.
• Condominiums: The condo project must be on the FHA's approved list or meet FHA requirements for spot approval.
• Manufactured Homes: These must meet specific requirements, including being permanently attached to a foundation.
• Townhouses: These are eligible for FHA financing.

FHA loans cannot be used for investment properties where you don't intend to live, vacation homes, or commercial properties. The property must be your primary residence.

The minimum credit score requirements for an FHA loan are:

• 580 or higher: Eligible for a 3.5% down payment
• 500-579: Eligible for an FHA loan with a 10% down payment
• Below 500: Generally not eligible for FHA financing

Keep in mind that while these are the FHA's minimum requirements, individual lenders may set higher credit score requirements (known as "lender overlays"). Many FHA-approved lenders require a minimum score of 620 or higher, regardless of the down payment amount.

The minimum down payment for an FHA loan depends on your credit score:

• Credit score of 580 or higher: 3.5% of the purchase price
• Credit score between 500 and 579: 10% of the purchase price

For example, if you're purchasing a $300,000 home and have a credit score of 600, you would need a down payment of at least $10,500 (3.5%). If your credit score is 550, you would need a down payment of at least $30,000 (10%).

The down payment can come from your own savings, gift funds from family members, employer assistance programs, or down payment assistance programs offered by state and local governments.

The FHA doesn't set minimum or maximum income requirements for FHA loans. Instead, they focus on your ability to afford the loan, which is measured by your debt-to-income ratio (DTI).

For FHA loans, the general guidelines are:

• Front-End Ratio: Your housing expenses (mortgage payment, property taxes, insurance, and HOA fees) should not exceed 31% of your gross monthly income.
• Back-End Ratio: Your total monthly debt payments (housing expenses plus other debts like car loans, student loans, and credit cards) should not exceed 43% of your gross monthly income.

However, the FHA allows for higher ratios (up to 50% or sometimes higher) with compensating factors such as a larger down payment, significant cash reserves, or a strong credit history.

You must also have stable, verifiable income for at least two years and demonstrate that your income is likely to continue for at least three years.

FHA loan limits vary by county and are based on local housing costs. In 2025, the FHA loan limits are:

• Low-Cost Areas: $472,030 for a single-family home
• High-Cost Areas: $1,089,300 for a single-family home
• Special Exception Areas (Alaska, Hawaii, Guam, and the U.S. Virgin Islands): $1,633,950 for a single-family home

Higher limits apply for multi-unit properties (2-4 units). For example, in low-cost areas, the limits are $604,400 for a duplex, $730,525 for a triplex, and $907,900 for a fourplex.

To find the specific loan limit for your county, visit our Loan Limits page.

Yes, you can still qualify for an FHA loan after a bankruptcy or foreclosure, but you'll need to wait for a certain period and demonstrate that you've reestablished good credit:

• Chapter 7 Bankruptcy: You must wait at least 2 years from the discharge date (not the filing date), and you must have reestablished good credit and demonstrated responsible financial management.
• Chapter 13 Bankruptcy: You may be eligible for an FHA loan after making 12 months of on-time payments under your bankruptcy plan, with court approval.
• Foreclosure: You must wait at least 3 years from the completion date of the foreclosure. This waiting period may be shortened to 1 year if the foreclosure was due to extenuating circumstances beyond your control (such as serious illness or death of a wage earner) and you've reestablished good credit.
• Short Sale or Deed-in-Lieu of Foreclosure: You must wait at least 3 years, though exceptions may be made for extenuating circumstances.

In all cases, you must demonstrate that you've recovered from the event that led to the bankruptcy or foreclosure and that you're now financially responsible.

FHA mortgage insurance is a type of protection that benefits the lender if you default on your loan. It consists of two parts:

1. Upfront Mortgage Insurance Premium (UFMIP): A one-time premium of 1.75% of the loan amount, paid at closing. This can be financed into the loan amount, so you don't have to pay it out of pocket.
2. Annual Mortgage Insurance Premium (MIP): An annual premium that ranges from 0.15% to 0.75% of the loan amount, depending on the loan term, loan amount, and loan-to-value ratio. This is divided into monthly payments and included in your mortgage payment.

For example, on a $300,000 loan, the UFMIP would be $5,250 (1.75% of $300,000). If the annual MIP rate is 0.55%, the annual premium would be $1,650 (0.55% of $300,000), or about $137.50 per month.

The duration of the Annual Mortgage Insurance Premium (MIP) depends on the loan-to-value ratio (LTV) at the time of origination and the loan term:

• 30-Year Loans with LTV > 90% (down payment less than 10%): MIP is required for the life of the loan.
• 30-Year Loans with LTV ≤ 90% (down payment of 10% or more): MIP is required for 11 years.
• 15-Year Loans with LTV > 90% (down payment less than 10%): MIP is required for the life of the loan.
• 15-Year Loans with LTV ≤ 90% (down payment of 10% or more): MIP is required for 11 years.
• 15-Year Loans with LTV ≤ 78% (down payment of 22% or more): MIP is required for 11 years, but the annual MIP rate is significantly lower (typically 0.15%).

If you want to eliminate MIP before these timeframes, you would need to refinance into a conventional loan once you have at least 20% equity in your home.

Unlike private mortgage insurance (PMI) on conventional loans, which can be canceled once you reach 20% equity, FHA mortgage insurance premium (MIP) cannot be canceled in most cases.

For FHA loans originated after June 3, 2013:

• If your original loan-to-value ratio (LTV) was greater than 90% (down payment less than 10%), MIP is required for the life of the loan.
• If your original LTV was 90% or less (down payment of 10% or more), MIP is required for 11 years.

The only way to eliminate MIP before these timeframes is to refinance into a conventional loan once you have at least 20% equity in your home.

For FHA loans originated before June 3, 2013, different rules apply, and you may be able to cancel MIP once you reach 22% equity based on the original amortization schedule.

The FHA Upfront Mortgage Insurance Premium (UFMIP) is 1.75% of the base loan amount, regardless of the loan term or loan-to-value ratio.

For example:

• On a $200,000 loan, the UFMIP would be $3,500 (1.75% of $200,000)
• On a $300,000 loan, the UFMIP would be $5,250 (1.75% of $300,000)
• On a $400,000 loan, the UFMIP would be $7,000 (1.75% of $400,000)

The UFMIP can be paid at closing or financed into the loan amount. Most borrowers choose to finance it, which increases the loan amount but doesn't affect the down payment requirement (which is based on the purchase price, not the final loan amount).

The FHA loan application process involves several steps:

1. Find an FHA-Approved Lender: Only FHA-approved lenders can offer FHA loans. You can find approved lenders through the HUD website or by asking for recommendations from real estate agents, friends, or family.
2. Get Pre-Approved: Before house hunting, get pre-approved to determine how much you can borrow. The lender will review your credit, income, assets, and debts.
3. Find a Home: Look for a property that meets your needs and FHA requirements. The property must be your primary residence and meet FHA's Minimum Property Standards.
4. Make an Offer: Once you find a suitable property, make an offer and negotiate with the seller.
5. Complete the Loan Application: If your offer is accepted, complete the full loan application (Form 1003) with your lender.
6. Provide Documentation: Submit required documents, such as pay stubs, W-2s, tax returns, bank statements, and identification.
7. FHA Appraisal: The lender will order an FHA appraisal to determine the property's value and ensure it meets FHA standards.
8. Underwriting: The lender's underwriting department will review your application, documentation, and the appraisal to make a final decision.
9. Closing: If approved, you'll sign the final paperwork, pay closing costs, and receive the keys to your new home.

The entire process typically takes 30-45 days from application to closing, though it can vary depending on various factors.

When applying for an FHA loan, you'll need to provide various documents to verify your identity, income, assets, and other information. Typically, these include:

• Identification: Valid government-issued ID (driver's license, passport) and Social Security card
• Income Verification:
  • Pay stubs for the last 30 days
  • W-2 forms for the past two years
  • Federal tax returns for the past two years (especially if self-employed)
  • If applicable: proof of other income sources (alimony, child support, rental income, etc.)
• Employment Verification:
  • Name and address of employers for the past two years
  • If self-employed: business license, profit and loss statements, and business tax returns
• Asset Documentation:
  • Bank statements for the past two months (all accounts)
  • Investment account statements (retirement accounts, stocks, bonds, etc.)
  • If using gift funds: gift letter and proof of transfer
• Debt Information:
  • List of all current debts and monthly payments
  • Information about any rental or mortgage payment history
• Additional Documents:
  • Proof of any down payment assistance
  • If applicable: divorce decree, bankruptcy discharge papers, or foreclosure documentation
  • Explanation letter for any credit issues or employment gaps

Your lender may request additional documents based on your specific situation. It's best to gather these documents before applying to streamline the process.

The FHA loan process typically takes about 30-45 days from application to closing, though it can vary depending on several factors:

• Pre-Approval: 1-3 days
• Finding a Home: Varies (depends on your market and preferences)
• Loan Application to Closing: 30-45 days, including:
  • Processing: 1-2 weeks
  • Appraisal: 1-2 weeks
  • Underwriting: 1-2 weeks
  • Closing Preparation: 1 week

Factors that can affect the timeline include:

• Completeness of your application and documentation
• Lender's current workload and processing times
• Appraisal scheduling and completion
• Property condition (if repairs are required)
• Title issues or other complications

To help speed up the process, be responsive to requests for additional information, provide complete documentation upfront, and choose an experienced FHA lender with efficient processes.

Closing costs for an FHA loan typically range from 2% to 6% of the loan amount, depending on various factors such as the property location, loan amount, and lender fees. These costs include:

• FHA-Specific Costs:
  • Upfront Mortgage Insurance Premium (UFMIP): 1.75% of the loan amount (can be financed)
  • First month's Annual Mortgage Insurance Premium (MIP)
• Lender Fees:
  • Origination fee (typically 0.5% to 1% of the loan amount)
  • Application fee
  • Credit report fee
  • Underwriting fee
  • Processing fee
• Third-Party Fees:
  • Appraisal fee ($300-$500)
  • Home inspection fee (optional but recommended, $300-$500)
  • Title search and title insurance ($500-$1,500)
  • Settlement or closing fee ($500-$1,000)
  • Recording fees ($25-$250)
  • Survey fee (if required, $400-$600)
• Prepaid Items:
  • Homeowners insurance premium (typically 1 year upfront)
  • Property tax reserves (2-6 months)
  • Prepaid interest (from closing date to end of month)

Good news: FHA loans allow sellers to contribute up to 6% of the purchase price toward the buyer's closing costs, which can significantly reduce your out-of-pocket expenses. Additionally, some closing costs may be negotiable, and you may be eligible for closing cost assistance programs in your area.

An FHA Streamline Refinance is a simplified refinance program for borrowers with existing FHA loans. It's designed to help borrowers take advantage of lower interest rates with minimal paperwork and costs. Key features include:

• No Income Verification: In most cases, you don't need to verify your income or employment.
• No Credit Check: A full credit report is typically not required (though some lenders may still check your credit).
• No Appraisal Required: In most cases, you can skip the appraisal, saving time and money.
• Reduced Documentation: The paperwork is significantly less than a traditional refinance.
• Lower MIP: If your original FHA loan was endorsed before June 1, 2009, you may qualify for a reduced upfront MIP of 0.01% and an annual MIP of 0.55%.

To qualify for an FHA Streamline Refinance, you must meet these requirements:

• You must have an existing FHA loan.
• Your loan must be current (not delinquent).
• You must have made at least 6 monthly payments on your current FHA loan.
• At least 210 days must have passed since the closing date of your original loan.
• The refinance must result in a "net tangible benefit," such as a lower interest rate, lower monthly payment, or a change from an adjustable-rate to a fixed-rate mortgage.

There are two types of FHA Streamline Refinances: credit-qualifying and non-credit-qualifying. The non-credit-qualifying option is more streamlined, while the credit-qualifying option requires credit verification and debt-to-income analysis but may offer better terms.

Yes, you can refinance from an FHA loan to a conventional loan, and many borrowers do this to eliminate the FHA's mortgage insurance premium (MIP), especially if they've built up at least 20% equity in their home.

Benefits of refinancing from FHA to conventional include:

• Eliminate MIP: If you have at least 20% equity, you can avoid paying mortgage insurance altogether. Even with less equity, conventional loan PMI is typically less expensive than FHA MIP and can be removed once you reach 20% equity.
• Potentially Lower Interest Rates: If your credit has improved since you got your FHA loan, you might qualify for a better interest rate on a conventional loan.
• Higher Loan Limits: Conventional loans often have higher loan limits than FHA loans in many areas.
• More Flexibility: Conventional loans have fewer property restrictions and can be used for second homes or investment properties.

To qualify for a conventional refinance, you'll typically need:

• A credit score of at least 620 (higher scores get better rates)
• A debt-to-income ratio of 45% or less (though exceptions can be made)
• Stable income and employment
• At least 3% equity in your home (but 20% equity to avoid PMI)

The refinance process will require a new application, credit check, income verification, and appraisal to determine your home's current value and your equity position.

An FHA cash-out refinance allows you to refinance your existing mortgage (whether it's an FHA loan or not) and take out cash from your home's equity. This can be useful for debt consolidation, home improvements, education expenses, or other financial needs.

Key features of an FHA cash-out refinance include:

• Loan-to-Value Ratio: You can borrow up to 80% of your home's appraised value.
• Credit Requirements: Minimum credit score of 580 (though many lenders require 620 or higher).
• Occupancy: The property must be your primary residence, and you must have lived there for at least 12 months before applying.
• Payment History: You must have made on-time mortgage payments for the past 12 months.
• Debt-to-Income Ratio: Typically limited to 43%, though exceptions may be made with compensating factors.
• Mortgage Insurance: FHA mortgage insurance is required, including both the upfront premium (1.75%) and annual premium (0.55% to 0.75%).

The process for an FHA cash-out refinance is similar to a regular FHA loan application, requiring full documentation of income, assets, and credit, as well as a new appraisal to determine your home's current value.

It's important to carefully consider whether a cash-out refinance makes financial sense for your situation, as it increases your mortgage debt and may extend your loan term.

FHA property requirements, known as Minimum Property Standards (MPS), ensure that the home is safe, secure, and structurally sound. These requirements are assessed during the FHA appraisal process and include:

• Safety and Health:
  • The property must be free from hazards that could affect the health and safety of occupants.
  • Adequate heating, electrical, and plumbing systems must be in place and functioning properly.
  • The property must have safe access and egress without trip hazards.
  • The property must be free from lead-based paint hazards (for homes built before 1978).
• Security:
  • The property must provide adequate security with functional locks on all exterior doors and windows.
  • The property must have proper drainage to prevent water intrusion.
• Structural Soundness:
  • The foundation must be stable without significant cracks or settlement.
  • The roof must be in good condition with at least 2 years of remaining life.
  • The property must be free from termite infestation or damage.
  • The mechanical systems (HVAC, electrical, plumbing) must be in working order.
• Additional Requirements:
  • Each bedroom must have an egress window or door for emergency exit.
  • The property must have adequate space for living, sleeping, cooking, and dining.
  • The property must have at least one bathroom with a toilet, sink, and shower or tub.
  • The property must have a functional kitchen with a sink, stove, and refrigerator.
  • The property must have adequate utilities, including water, electricity, and sewage disposal.

If the appraiser identifies issues that don't meet these standards, repairs may be required before the loan can close. In some cases, you can use an FHA 203(k) rehabilitation loan to finance both the purchase and necessary repairs.

Yes, you can use an FHA loan for a fixer-upper, but there are some important considerations:

• Standard FHA Loan: If the property has only minor issues that don't affect safety, security, or structural soundness, you may be able to use a standard FHA loan. The property must still meet FHA's Minimum Property Standards, so any significant issues would need to be repaired before closing.
• FHA 203(k) Rehabilitation Loan: For properties that need more substantial repairs or renovations, the FHA 203(k) loan is specifically designed for this purpose. It allows you to finance both the purchase of the home and the cost of repairs with a single loan.

The FHA 203(k) loan comes in two varieties:

• Standard 203(k): For major rehabilitation projects costing more than $35,000, including structural repairs, room additions, or major remodeling.
• Limited 203(k) (formerly known as Streamlined 203(k)): For less extensive repairs and improvements costing less than $35,000, such as new flooring, painting, appliance replacement, or minor repairs.

With a 203(k) loan, the property doesn't need to meet FHA standards before purchase, but it must meet these standards after the planned repairs are completed. The loan amount is based on the projected value of the property after improvements, not just the purchase price.

The 203(k) process involves additional steps, including detailed repair specifications, contractor bids, and inspections during and after the renovation process. While it's more complex than a standard FHA loan, it can be an excellent option for buying a fixer-upper that might not qualify for traditional financing.

Yes, you can use an FHA loan to purchase a condominium, but the condo project must meet FHA requirements and be on the FHA's approved list or eligible for spot approval.

There are two ways a condo can be eligible for FHA financing:

1. FHA-Approved Condo Projects: These are condo projects that have already been reviewed and approved by the FHA. You can search for approved condos on the HUD website using the FHA Condo Lookup tool.
2. Single-Unit Approval (SUA): If a condo project isn't on the approved list, you may still be able to get FHA financing through the Single-Unit Approval process, which allows for case-by-case approval of individual units in non-approved projects.

For a condo project to be eligible for FHA approval or Single-Unit Approval, it must meet certain requirements, including:

• At least 50% of the units must be owner-occupied
• No more than 10% of the units can be owned by a single investor
• No more than 15% of the units can be more than 60 days past due on HOA fees
• At least 50% of the units must be sold if the project is new construction
• The HOA must have adequate reserves (at least 10% of the annual budget)
• The project must have adequate insurance coverage
• No more than 35% of the total floor area can be used for commercial/non-residential purposes
• The project must not be subject to pending litigation that could affect the viability of the project

If you're interested in purchasing a condo with an FHA loan, it's best to work with a lender experienced in FHA condo financing who can help determine if the project is eligible and guide you through the process.