FHA loans
An FHA loan is insured by the Federal Housing Administration and allows a down payment as low as 3.5% with a credit score of 580 or higher. It is designed for buyers whose credit or debt ratios make a conventional loan expensive or out of reach.
Best for: Buyers with lower credit scores, limited savings, or a higher debt-to-income ratio.
What makes this loan different
3.5% down
With a credit score of 580 or above, the minimum down payment is 3.5% of the purchase price. Below 580 a larger down payment is required.
Friendlier on credit
FHA pricing is far less sensitive to credit score than conventional. If your score is in the 600s, FHA is often materially cheaper even after mortgage insurance.
Gift funds allowed
The entire down payment can come from an eligible gift, which matters for buyers who have income but not savings.
What you'll need
- Credit score of 580 or above for 3.5% down; lower scores need more down.
- The home must be your primary residence — FHA is not for investment property.
- Property must meet FHA appraisal standards, which are stricter about condition than conventional.
- Loan amount within the FHA limit for the county, which is set annually.
- Both an upfront and an annual mortgage insurance premium apply.
Honest trade-offs
- Mortgage insurance generally lasts the life of the loan — the usual escape is refinancing to conventional once you have equity and credit to justify it.
- The upfront premium is added to your loan balance, so you start slightly above your purchase price.
- Appraisal standards are stricter, which can complicate a fixer-upper.
Common questions
What credit score do I need for an FHA loan?
580 or above qualifies you for the 3.5% minimum down payment. Scores below 580 can still qualify but require a larger down payment. Individual lenders may set their own higher minimums on top of the FHA floor.
Does FHA mortgage insurance ever go away?
On most current FHA loans, no — the annual premium lasts the life of the loan. The standard route out is refinancing into a conventional loan once you have enough equity and a credit profile that prices well. That is worth modeling before you choose FHA over conventional.
Can I use an FHA loan for a rental property?
No. FHA financing requires the property to be your primary residence. You can buy a two-to-four unit building with FHA and rent the other units, but you must live in one of them.
Check the rules yourself
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