FHA loans are insured by the Federal Housing Administration and are designed to help buyers who may not qualify for a conventional loan. They are especially popular with first-time buyers.
Why people choose FHA
- Down payment as low as 3.5% with a 580 credit score
- More flexible credit guidelines than conventional
- Gift funds allowed for the down payment
- Often easier to qualify with a higher debt-to-income ratio
The mortgage insurance tradeoff
FHA loans require mortgage insurance premiums, including an upfront premium and an annual premium paid monthly. On many FHA loans this insurance stays for the life of the loan, which is the main tradeoff versus conventional.
A common strategy
Some buyers start with an FHA loan to get into a home, then refinance into a conventional loan later once their credit and equity improve, removing the mortgage insurance.
FHA versus conventional is one of the most important decisions you will make. We will run both so you can see the real monthly and long-term cost.