Can I qualify for an FHA loan, and how much do I need down?

Who is an FHA loan a good fit for?

• Credit that's rebuilding or a thinner credit history.
• Higher debt-to-income from car loans or student loans.
• Small down payment, or a down payment that's a gift from family.
• Buyers after a past bankruptcy or foreclosure, once the waiting period has passed.
• House hackers: buy a duplex, triplex, or fourplex, live in one unit, and rent the others.

What are the basic FHA requirements?

• Down payment: 3.5% with a 580+ credit score; 10% with a score from 500 to 579.
• Primary residence: you must live in the home (1 to 4 units).
• FHA loan limits: set by county each year. I'll tell you the limit where you're buying.
• Property standards: the FHA appraisal checks that the home is safe and sound.
• Steady income you can document, with more room on debt-to-income than many conventional loans.

What does FHA mortgage insurance cost?

This is the big trade-off, and I want you to see it clearly:

• Upfront mortgage insurance: 1.75% of the loan amount, usually added to the loan rather than paid in cash.
• Annual mortgage insurance: for most borrowers about 0.55% of the loan per year, paid monthly.
• How long it lasts: for the life of the loan if you put less than 10% down; 11 years if you put 10% or more down.

Many FHA borrowers later refinance into a conventional loan once they have enough equity to drop mortgage insurance for good. I'll show you when that could make sense.

What else does it cost?

• Closing costs: commonly 2% to 5% of the loan amount. The seller can pay up to 6% of the price toward your closing costs.
• Down payment help: see down payment assistance in CA, TX, FL, and CO.
• Our costs: shown on your Loan Estimate, line by line, before you commit.

FHA vs. conventional: which is cheaper?

It depends on your credit score and down payment. With strong credit, a conventional loan often costs less over time because its mortgage insurance can come off. With a lower score, FHA is often cheaper. I'll price both for you so you're not guessing. See all the options on buying a home.

Example scenario (illustrative)

A nurse in Jacksonville has a 610 credit score after paying off some medical collections, steady income, and a $12,000 gift from her parents. She buys a $300,000 home with FHA's 3.5% down, the seller covers part of her closing costs, and we map out when a future refinance into a conventional loan could remove her mortgage insurance.

Our take

FHA gets a bad rap it doesn't deserve. It's one of the best ways to get into a home if your credit is still healing. I'll always show you the true cost of FHA mortgage insurance next to a conventional quote, and help you plan your way out of it later.