Put down 3.5%. Keep the rest working.

How FHA works

FHA loans are insured by the Federal Housing Administration, part of HUD. That insurance protects the lender, which lets lenders accept smaller down payments and more flexible credit. You still borrow from a private lender. We shop that lender for you.

FHA loans are for primary residences only, so you must plan to live in the home. You can buy a single-family home, a townhome, an approved condo or a two- to four-unit property if you live in one of the units. Condos need FHA project approval or, in some cases, a single-unit approval.

Down payment and credit

• Credit score of 580 or higher: as little as 3.5% down.
• Credit score of 500 to 579: at least 10% down.
• Gift funds from family and other approved sources are generally allowed.
• Sellers can contribute toward your closing costs, within FHA limits.

Individual lenders often set higher minimums than FHA does. That is one reason we compare multiple lenders instead of taking the first answer.

Mortgage insurance, explained honestly

Every FHA loan carries a mortgage insurance premium (MIP). There are two parts:

• Upfront MIP: 1.75% of the base loan amount, usually financed into the loan rather than paid in cash.
• Annual MIP: a yearly premium divided into your monthly payment. The rate depends on your loan amount, term and down payment.

With less than 10% down, annual MIP generally lasts for the life of the loan. With 10% or more down, it generally ends after 11 years. Many FHA borrowers later refinance into a conventional loan once they have enough equity to drop mortgage insurance.

Is FHA the right fit?

FHA often wins when your credit score is below the mid-600s or your down payment is small. With stronger credit, a conventional loan may cost less, even with a similar down payment, because PMI can be cheaper than MIP and can be removed. The answer is in the numbers, not the label.

That is exactly what our process is for. A 30-minute call to understand your goals. Two to three hours building FHA and conventional options side by side. Then a 30- to 45-minute presentation where you see the monthly payment, the cash to close and the long-term cost of each.

Try your own numbers in our mortgage calculator, or request a quote to get the full comparison.