FHA Loans
FHA loans are backed by the Federal Housing Administration and built for buyers who don't fit the mold of a traditional conventional mortgage — lower credit scores, smaller down payments, and a past bankruptcy or foreclosure don't have to keep you out of the market. It remains one of the most accessible paths to homeownership in the country, especially for first-time buyers.
Estimate only. Upfront MIP calculated at 1.75% of the base loan amount; monthly MIP estimated at 0.55% annually, both standard current FHA rates for most 30-year loans. Actual figures depend on your loan term, loan-to-value, and current FHA guidelines at the time of your application.
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development. The FHA itself doesn't lend money — instead, it insures loans made by approved lenders like MyLoanDesk, which reduces the lender's risk and allows for more flexible qualifying guidelines than a typical conventional mortgage.
That flexibility is what makes FHA financing so widely used, particularly among first-time buyers: lower minimum credit scores, a smaller required down payment, and more forgiving guidelines around past credit events like bankruptcy or foreclosure. In exchange, FHA loans require mortgage insurance, which we break down below.
How FHA Financing Works
Program Highlights
- Down payments as low as 3.5% with a qualifying credit score
- Down payment can come entirely from an eligible gift or assistance program
- More flexible credit and debt-to-income guidelines than conventional loans
- Available for single-family homes, condos, 2-4 unit properties, and eligible manufactured homes
- FHA 203(k) option to finance a home purchase and renovation costs together
- Sellers can contribute up to 6% of the purchase price toward your closing costs
FHA's relaxed credit guidelines mean buyers who've had a past bankruptcy, foreclosure, or a thinner credit file often qualify for FHA financing well before they'd qualify for a conventional loan — sometimes years sooner.
Because the down payment requirement is so low, FHA loans let buyers get into a home while keeping more cash in reserve for moving costs, repairs, or an emergency fund — rather than draining savings to hit a 20% conventional down payment.
Allowing seller-paid closing costs and gift funds for the down payment means many buyers can purchase a home with very little cash brought to the table beyond the 3.5% minimum.
Who FHA Loans Are For
- First-time homebuyers without a large down payment saved up
- Buyers with a credit score between 500 and 669 who don't yet qualify conventionally
- Buyers within two to three years of a past bankruptcy or foreclosure
- Buyers purchasing a fixer-upper who want renovation costs rolled into one loan
- Buyers who'd rather keep cash in reserve than maximize their down payment
FHA Loans vs. Conventional and VA Loans
| FHA Loan | Conventional Loan | VA Loan | |
|---|---|---|---|
| Minimum down payment | 3.5% (with 580+ score) | As low as 3%, usually 5%+ | 0% for eligible veterans |
| Minimum credit score | 500–580, program dependent | Typically 620+ | No official minimum; lender-set |
| Mortgage insurance | Upfront + annual MIP, often for the loan's life | PMI, removable around 20% equity | None — no monthly mortgage insurance |
| Best for | Buyers with lower credit or smaller down payments | Buyers with strong credit and 5%+ down | Eligible active duty, veterans, and some spouses |
Eligibility Requirements
- Credit score of 580+ for 3.5% down, or 500–579 for 10% down
- Debt-to-income ratio generally up to 43–50%, depending on compensating factors
- Steady employment history, typically at least two years
- At least two years since a Chapter 7 bankruptcy discharge, or three years since a foreclosure
- Property must be your primary residence and meet FHA minimum property standards
Documents You'll Likely Need
Frequently Asked Questions
What credit score do I need for an FHA loan?
Borrowers with a credit score of 580 or higher typically qualify for FHA's minimum 3.5% down payment. Scores between 500 and 579 may still qualify, but usually require a larger 10% down payment. Scores below 500 generally do not qualify for FHA financing.
How much down payment do I need for an FHA loan?
With a credit score of 580 or higher, the minimum down payment is 3.5% of the purchase price. With a credit score between 500 and 579, most lenders require at least 10% down. Down payment funds can often come from savings, an eligible gift, or a qualifying down payment assistance program.
What is FHA mortgage insurance (MIP) and how much does it cost?
FHA loans require two forms of mortgage insurance: an upfront premium (UFMIP), typically 1.75% of the loan amount and usually financed into the loan, and an annual premium (MIP), typically around 0.55% of the loan balance per year, paid monthly. Unlike conventional PMI, FHA's annual MIP often continues for the life of the loan unless you refinance out of FHA financing.
Can I get an FHA loan after a bankruptcy or foreclosure?
Yes, in many cases. FHA guidelines generally allow borrowers to qualify roughly two years after a Chapter 7 bankruptcy discharge and around three years after a foreclosure, provided credit has been reestablished and payment history since then has been solid. Specific timelines can vary by lender and circumstance.
What property types are eligible for FHA financing?
FHA loans can be used for single-family homes, FHA-approved condominiums, 2-4 unit properties (as long as the borrower occupies one unit), and many manufactured and modular homes that meet FHA construction standards.
What documents do I need to apply for an FHA loan?
Typical documentation includes two years of tax returns, W-2s or 1099s, your most recent pay stub, two months of bank statements, recent statements for any investment or retirement accounts, and a valid government-issued ID. Self-employed borrowers generally also provide two years of business tax returns and a year-to-date profit and loss statement.
Is there a maximum debt-to-income ratio for FHA loans?
FHA guidelines are generally more flexible than conventional loans, with many borrowers qualifying up to around a 43-50% debt-to-income ratio depending on credit score, reserves, and other compensating factors. Your total monthly debts, including the new mortgage payment, are weighed against your gross monthly income.
Can I use an FHA loan to buy a fixer-upper?
Yes — the FHA 203(k) rehabilitation loan lets you finance the purchase price and the cost of eligible repairs or renovations in a single loan, based on the property's value after the work is completed, rather than requiring separate financing for the purchase and the renovation.