What is an FHA Loan

An FHA loan, a government-backed mortgage, is a mortgage insured by the Federal Housing Administration where borrowers pay for mortgage insurance, protecting the lender from a loss if the borrower defaults on the loan. Each state has different limits so it’s important to understand what is available for your FHA home loan. You can look up the current FHA loan limits of your country or metropolitan area by visiting https://entp.hud.gov/idapp/html/hicostlook.cfm.

Why Choose an FHA Loan

FHA loans offer attractive interest rates with less demanding and more flexible requirements, such as credit scores, than conventional loans. Minimum credit scores, typically above 500, do qualify a homeowner for an FHA loan but the score will determine a down payment to get a mortgage. Borrowers with a credit score of 580 or higher can get a mortgage with a down payment as low as 3.5% and credit scores between 500-579 will be expected to make a down payment of at least 10%. The FHA will make allowances under certain circumstances for people with credit scores under 500.

Since the FHA is not a lender, but an insurer, it is important for borrowers to shop around. Not all FHA-approved lenders offer the same interest rates and costs.


FHA home loans are similar to other types of residential mortgage loans but are instead, insured by the federal government, the Federal Housing Administration (FHA). Rules and requirements are set forth by the Department of Housing and Urban Development (HUD), the agency FHA falls under. Borrowers who meet HUD’s minimum eligibility requirements can apply for an FHA loan through an approved lender who participates in the program. A borrower’s application, or screening process, will include a review of their employment history, credit scores, debt-to-income ratios and previous borrowing history, to ensure they meet HUD’s minimum guidelines for an FHA loan. The property itself will also need to meet HUD’s guideline’s for an FHA loan. Below you will find some of the benefits.

+Actual mortgage payments vary based on the applicant's situation and current interest rates when applied.

+Pay your mortgage at any time without pre-payment penalties.

+30, 25, 20 and 15 year terms with fixed rates are available.

+5 year adjustable rate mortgages are available.

+If a borrower defaults on an FHA loan, the FHA uses the collected insurance premiums to compensate the bank.

+FHA loans are assumable. A buyer can take over your FHA loan mortgage, picking up where you left off. A buyer could benefit from lower interest rates that may be unavailable elsewhere.