FHA Home Loans

What is an FHA home loan?

Do low down payment options and flexible credit requirements sound good? Of course, they do! FHA loans offer those benefits, as well as the option to use gift funds for down payment and closing costs. Relatives, employers, unions, charitable organizations, government agencies, and even friends can gift funds for you to use in the transaction. FHA loans make it possible for you to buy the home of your dreams while keeping cash in your pocket.

These are called FHA loans because the Federal Housing Administration (FHA) insures this type of mortgage after it has been issued by an FHA-approved lender. One important thing to keep in mind is that if you finance your home using an FHA loan, you’ll have to pay mortgage insurance. These insurance premiums help protect lenders in case an FHA borrower defaults on their loan.

With less-than-perfect credit or little down, you could qualify for an FHA and pay only 3.5% down on your home.

Who qualifies for an FHA mortgage?

If you don’t have a large down payment saved or your credit score isn’t quite high enough for other loans, an FHA loan could be a great option for you! FHA loans are a popular choice for first-time homebuyers because of the flexible credit requirements and low down payment options, but plenty of other home buyers can benefit from this loan program too. FHA loans can allow you to finance up to 96.5% of the home’s value or purchase price (whichever is lower), meaning your down payment would be much smaller than other loan programs.

You may be eligible for this program if you have a credit score over 580 and a maximum debt-to-income ratio of 55% (for purchase or rate/term refinance transactions where automated underwriting findings show your loan as "approved/eligible"). Your loan officer will review your financial and credit history to find out if you meet the requirements for this loan program.

If you want to finance a second home or rental property, an FHA loan isn’t your solution. These mortgages can only be used on primary residences. Depending on your circumstances, you could consider a conventional loan for a second home or rental property.

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