- FHA loans are insured by the Federal Housing Administration for primary homes of 1 to 4 units.
- 3.5% down with a 580+ score; 10% down from 500 to 579.
- Every FHA loan has upfront and annual mortgage insurance (MIP).
How FHA works
A private lender makes the loan and FHA insures it, which lets lenders approve files that wouldn't fit conventional rules. You pay for that insurance through mortgage insurance premiums.
FHA isn't only for first-time buyers, and there's no income cap. Plenty of my FHA files are refinances.
FHA loan parameters
| FHA | |
|---|---|
| Loan limit | Set yearly by HUD by county; higher for 2 to 4 units |
| Down payment | 3.5% with 580+; 10% with 500–579 |
| Upfront MIP | 1.75% of the base loan, usually financed |
| Annual MIP | Life of loan under 10% down; 11 years with 10%+ down |
| Occupancy | Primary residence, 1 to 4 units |
| Gift funds | Can cover the entire down payment |
| Seller contributions | Up to 6% of the price |
| Streamline refinance | Existing FHA loan; 210 days and 6 payments; up to $500 cash back |
| Cash-out refinance | Up to 80% LTV; lived in the home the past 12 months |
| After credit events | 2 years after Chapter 7; 3 years after foreclosure |
HUD rules plus lender overlays apply. Subject to approval.
Refinancing with FHA
- FHA Streamline: lower the rate on an existing FHA loan with lighter paperwork and often no appraisal.
- Rate-and-term: up to 97.75% LTV on an owner-occupied home.
- Cash-out: up to 80% LTV.
- Refinancing out of FHA: once you have about 20% equity, moving to conventional can drop mortgage insurance for good.
The trade-offs
- Mortgage insurance can last the life of the loan with under 10% down.
- Primary residences only.
- Property condition standards can be stricter than conventional.
Frequently asked questions
What credit score do I need for FHA?
FHA allows 580 with 3.5% down and 500 to 579 with 10% down. Many lenders set higher floors, which is why I shop the file.
Can I get rid of FHA mortgage insurance?
With under 10% down it lasts the life of the loan, so most people refinance into conventional once they reach about 20% equity.
Related loan programs
Learn more
Rates and program availability vary by state, property and lender. This is not a rate quote, a credit decision, an offer or a commitment to lend. Program restrictions apply. Larz Martin NMLS #2026245 · CA DRE #02241936 · Lumin Lending, Inc. NMLS #2716106 · CA DRE #02291443. Equal Housing Opportunity.
