FHA Loan
An FHA loan is a mortgage insured by the Federal Housing Administration. The insurance lets approved lenders accept a 3.5% down payment and lower credit scores than most conventional loans, in exchange for mortgage insurance premiums paid by the borrower.
Get Your FHA RateFHA loans by the numbers
| What | Figure | Source |
|---|---|---|
| Who insures the loan | The Federal Housing Administration, part of HUD | CFPB |
| Minimum down payment | 3.5% of the purchase price | HUD |
| Minimum credit score for 3.5% down | 580 (500 to 579 requires 10% down) | HUD Handbook 4000.1 |
| Upfront mortgage insurance premium | 1.75% of the base loan amount | HUD Mortgagee Letter 2023-05 |
| Annual premium, 30-year loan up to $726,200, more than 95% loan-to-value | 0.55% of the loan balance, for the full loan term | HUD Mortgagee Letter 2023-05 |
| Annual premium when the down payment is 10% or more | 0.50%, ending after 11 years | HUD Mortgagee Letter 2023-05 |
| 2026 one-unit loan limit range | $541,287 in low-cost counties to $1,249,125 in high-cost counties | HUD, set at 65% and 150% of the FHFA conforming limit |
Last reviewed 2026-10-05
Key Features
- ✓Down payment as low as 3.5% of the purchase price
- ✓Insured by the Federal Housing Administration, part of HUD
- ✓Available on one- to four-unit properties you live in
- ✓Upfront and annual mortgage insurance premiums on every loan
- ✓Loan limits set by county each calendar year
Who Is an FHA Loan a Good Fit For?
- Buyers with a small down payment
- Borrowers whose credit score prices poorly on a conventional loan
- Buyers of a two- to four-unit home who will live in one unit
- Homeowners with an existing FHA loan considering a streamline refinance
Requirements
Credit Score
580 or higher for the 3.5% down payment; 500 to 579 requires 10% down. Individual lenders often set higher minimums.
Down Payment
3.5% of the purchase price at a 580 score or higher; 10% from 500 to 579.
Debt-to-Income
Judged by FHA underwriting with compensating factors; lenders may set their own caps.
Pros and Cons
Advantages
- +Low down payment
- +More forgiving credit standards than most conventional loans
- +Gift funds can cover the down payment
- +Streamline refinance available later with reduced documentation
Considerations
- -An upfront premium of 1.75% of the loan amount
- -Annual premiums that last the full loan term when you put down less than 10%
- -Loan limits lower than conforming limits in most counties
- -Primary residences only
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