Government insured
FHA Loans
3.5% down, credit thresholds a conventional loan won't touch, and a loan the next buyer can assume from you.
FHA is a government-insured loan. The insurance is what lets a lender say yes to a borrower a conventional loan would decline.
What it allows
- 3.5% down with a credit score of 580 or higher
- 10% down with a score between 500 and 579
- Higher debt-to-income ratios than conventional typically permits
- Gift funds for the entire down payment
- A non-occupying co-borrower
- Up to four units, if you live in one
The mortgage insurance, stated honestly
FHA has two insurance charges: an upfront premium, usually financed into the loan, and an annual premium paid monthly.
On most current FHA loans at the minimum down payment, that monthly premium runs for the life of the loan. It does not fall off at 20% equity the way conventional PMI does. Put 10% or more down and it ends after 11 years.
The normal plan is to refinance out of FHA into a conventional loan once you have enough equity. That's not a flaw in the strategy — it is the strategy. FHA gets you in the door at 3.5% down; conventional gets you out of the insurance later.
The part nobody uses
FHA loans are assumable. A qualified buyer can take over your existing loan at your existing rate.
If you're holding a 3% FHA loan and rates are near 7%, that assumability is worth real money to the next buyer — and it should be in your listing. Very few agents raise it. It's one of the most underused features in residential lending.
The appraisal
FHA appraisals include minimum property requirements: the roof, the systems, peeling paint on older homes, handrails, working utilities. Sellers sometimes resist because of this.
Treat it as a feature. It's a floor under what you're buying, and it stops you purchasing a house with a failing roof and no money left to fix it.
FHA vs conventional, briefly
Conventional with 3% down and good credit usually beats FHA, because the PMI is cancellable and often cheaper. FHA wins when your credit is below the low 700s, when your debt ratio is high, or when the property needs the flexibility.
I run both. The answer changes with your score, and it's not close to obvious from the outside.
Down payment help
FHA stacks cleanly with down payment assistance. An FHA first with an assistance second can get you to effectively zero out of pocket.
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Questions people ask
What credit score do I need for an FHA loan?
580 gets you 3.5% down. Between 500 and 579 the program allows 10% down. Individual lenders set their own overlays above those floors, and they vary a lot — which is exactly why shopping matters here.
Does FHA mortgage insurance ever come off?
On most current FHA loans with the minimum down payment, no — it runs for the life of the loan. Put 10% or more down and it drops after 11 years. To remove it otherwise you refinance out of FHA, which is a normal and planned move once you have equity.
Can an FHA loan be assumed?
Yes. A qualified buyer can take over your FHA loan at your original rate. If you locked a low rate, that is a real selling point in a high-rate market and almost nobody uses it.
Can I use FHA for a duplex or fourplex?
Yes, up to four units, as long as you live in one of them. It is one of the best routes into owning rental property.
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