An FHA loan is a mortgage insured by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development. The insurance lets lenders accept smaller down payments and more flexible credit than many conventional programs.
Key features
- 3.5% down with a qualifying credit score; 10% down may be allowed with a lower score. The down payment can come from gift funds from family or an approved source.
- Flexible credit guidelines, including borrowers with thinner credit files or past credit events that have been resolved.
- Seller contributions toward closing costs are allowed within FHA limits.
- Loan limits are set by county each year. Los Angeles County has a high-cost limit; ask us for the current figure.
Mortgage insurance
FHA loans carry an upfront mortgage insurance premium, usually financed into the loan, plus a monthly premium. On most loans with less than 10% down, the monthly premium stays for the life of the loan, which is why many FHA borrowers later refinance into a conventional loan once they have 20% equity.
Who it suits
First-time buyers, buyers with limited savings, and anyone whose credit profile prices better under FHA than under conventional guidelines. We price both side by side so you can see the real monthly difference.
Related: FHA 203(k) renovation loans.