FHA Loans
A flexible path to homeownership for buyers with less cash or a shorter credit history.
An FHA loan is a mortgage insured by the Federal Housing Administration. The FHA does not lend money directly. It insures the loan, which gives lenders room to approve borrowers who might not fit a conventional box.
That insurance is why FHA financing is one of the most common ways first-time buyers get into a home: lower minimum credit scores, a smaller required down payment, and more forgiving treatment of past credit events.
How FHA financing works
You bring a down payment of at least 3.5 percent of the purchase price and the FHA insures the lender against loss. In exchange, you pay mortgage insurance: an upfront premium that is usually financed into the loan, plus an annual premium collected monthly.
- Down payment can come from savings, an eligible gift, or an approved assistance program
- Seller-paid closing cost credits are allowed within program limits
- The property must meet FHA appraisal and condition standards
What underwriting looks at
Beyond score and down payment, FHA underwriting weighs your payment history over the last 12 months, stability of income, and total monthly obligations. Compensating factors such as reserves, a long job history, or a low payment shock can help when one area is thin.
Costs to plan for
Beyond the 3.5 percent down payment, budget for closing costs that typically run 2 to 5 percent of the price, plus prepaid taxes and insurance collected for your escrow account. The upfront mortgage insurance premium of 1.75 percent is normally financed into the loan rather than paid in cash.
- Appraisal and inspection fees are paid during the contract period
- Seller credits and lender credits can offset closing costs
- Earnest money you deposit is credited back at closing
Documents to gather
Having your paperwork ready is the single biggest factor in a fast, low-stress FHA approval.
- Last 30 days of pay stubs and two years of W-2s
- Two months of complete bank statements for every account used
- Photo ID and Social Security number for each borrower
- Gift letter and donor documentation if any funds are gifted
Steps from preapproval to keys
We start with a preapproval so you know your number before you shop. Once you are under contract, we order the appraisal, submit to underwriting, clear conditions, and schedule closing. Most FHA purchases close in about 30 days when documents come in promptly.
Advantages
- Low down payment requirement
- More forgiving credit and debt-to-income guidelines
- Gift funds and assistance programs are widely accepted
- Assumable by a qualified buyer in many cases
Things to consider
- Mortgage insurance often stays for the life of the loan
- Loan limits vary by county
- Property condition standards can affect fixer-uppers
Common questions
Do I have to be a first-time buyer?
No. FHA financing is popular with first-time buyers, but it is available to repeat buyers who will occupy the home as a primary residence.
Can I remove FHA mortgage insurance later?
On most current FHA loans the annual premium remains for the life of the loan. Many borrowers refinance into a conventional loan once they have enough equity.
How much are FHA closing costs?
Plan on roughly 2 to 5 percent of the purchase price, plus prepaid taxes and insurance. Seller credits, lender credits, and eligible assistance programs can reduce what you bring to the table.
Can I buy a multi-unit property with FHA?
Yes, up to four units, as long as you live in one of them. Rental income from the other units can sometimes help you qualify.
How long does an FHA loan take to close?
Typically about 30 days from contract to closing, assuming the appraisal is scheduled quickly and underwriting conditions are returned promptly.
Program disclaimers
- * Higher interest rates apply
- ** For a 30-year, fixed-rate loan
- Program details are informational only and are not an offer for extension of credit or a commitment to lend. Terms are subject to change without notice.
Ready to explore FHA financing?
Start a conversation with a licensed loan officer, or begin your application whenever you're ready.