FHA Loans: The Complete Guide

The most common FHA loan. Used to purchase a primary residence (1–4 units). Requires 3.5% down with a 580+ credit score, or 10% down with a 500–579 credit score. Fixed and adjustable-rate options available. The foundation of FHA's single-family mortgage insurance program.

• Min. 580 credit score for 3.5% down
• Min. 500 credit score for 10% down
• 1–4 unit primary residences
• Fixed and ARM options
• Seller concessions up to 6%

Combines a home purchase (or refinance) with renovation financing in a single FHA-insured loan. Two versions: Standard 203(k) for major structural repairs ($5,000+ in work, requires a HUD-approved consultant) and Limited 203(k) for cosmetic improvements up to $35,000.

• Standard: structural repairs, additions
• Limited: cosmetic work up to $35,000
• HUD consultant required (Standard)
• Primary residence only
• Same FHA credit/down payment rules

Allows existing FHA borrowers to refinance into a lower rate with minimal documentation and no appraisal required in most cases. Must result in a "net tangible benefit" (lower rate/payment or shorter term). Cannot take cash out. Must be current on existing FHA loan.

• No appraisal required (most cases)
• Reduced income documentation
• Must have existing FHA loan
• Net tangible benefit required
• No cash-out permitted

Allows homeowners to refinance their existing mortgage (FHA or conventional) and take cash out up to 80% LTV. Full appraisal required. Must have made at least 12 months of on-time payments. Subject to standard FHA credit and income qualifying.

• Max 80% LTV cash-out
• Full appraisal required
• 12 months on-time payments
• FHA or conventional payoff
• Standard FHA qualifying applies

Allows borrowers to finance energy-efficient improvements (solar panels, insulation, HVAC, windows) as part of a purchase or refinance. The cost of improvements is added to the base loan amount above the appraised value. Requires a home energy assessment.

• Solar, HVAC, insulation eligible
• Loan can exceed appraised value
• Home energy assessment required
• Pairs with 203(b) or 203(k)
• Primary residence only

The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program for homeowners 62 and older. Converts home equity into cash, a line of credit, or monthly payments — with no monthly mortgage payment required. Loan is repaid when the borrower sells, moves out, or passes away.

• Borrower must be 62 or older
• Must own home outright or have low balance
• No monthly mortgage payment
• HUD-approved counseling required
• Non-recourse loan (no negative equity)

Provides financing for home improvements and repairs without requiring the borrower to refinance their existing mortgage. Loan amounts up to $25,000 for single-family homes. Does not require equity — can be used even if the home is worth less than the loan balance.

• Up to $25,000 (single-family)
• No equity required
• No refinance of existing mortgage
• Fixed-rate installment loan
• Primary or secondary residence

FHA insures loans for manufactured homes (mobile homes) and the lots they sit on. Two products: one for homes on land the borrower owns, and one for homes in mobile home parks. The home must meet HUD Manufactured Home Construction and Safety Standards.

• Home on owned land or in park
• HUD safety standards required
• Fixed-rate only
• Primary residence
• Shorter loan terms than site-built

• Lower credit score requirements — 580 for 3.5% down vs. 620 minimum for conventional
• Lower down payment — 3.5% vs. 5% standard conventional (though both have 3% programs)
• More flexible DTI limits — up to 57% with AUS approval vs. 45–50% conventional
• Seller concessions up to 6% of purchase price (vs. 3% for conventional with <10% down)
• Gift funds can cover 100% of down payment and closing costs
• Shorter waiting periods after bankruptcy and foreclosure than conventional
• Streamline Refinance option with minimal documentation and no appraisal
• Available for 1–4 unit properties (borrower must occupy one unit)
• Competitive interest rates — often comparable to or lower than conventional for lower credit scores
• Down payment assistance programs widely accepted
• Non-occupant co-borrowers allowed to help qualify

• MIP lasts the life of the loan for most borrowers (less than 10% down) — unlike conventional PMI which is cancellable
• 1.75% upfront MIP adds to loan balance or closing costs — conventional has no upfront MI
• Lower loan limits than conventional in most markets — may not cover higher-priced homes
• Stricter property condition requirements (MPRs) — sellers may be reluctant to accept FHA offers
• Primary residence only — no investment properties or second homes
• FHA appraisals are more stringent — required repairs must be completed before closing
• Condos must be on FHA-approved list — many condo associations are not approved
• Lender overlays may raise the effective minimum credit score above FHA's 580 floor
• In competitive markets, FHA offers may be less attractive to sellers than conventional
• No streamline refinance to a conventional loan — must do a full refinance to exit FHA

• The lifetime MIP trap — if you put less than 10% down, plan to refinance into a conventional loan once you reach 20% equity to eliminate MIP
• Property condition surprises — get a home inspection before making an FHA offer; required repairs can kill deals
• Condo eligibility — verify the condo project is on HUD's approved list before making an offer
• Lender overlays — shop multiple lenders; some impose credit score minimums above FHA's 580 floor
• Seller perception — in hot markets, some sellers prefer conventional offers; work with a strong realtor
• Loan limit gaps — verify the FHA limit for your county covers your target purchase price
• MIP vs. PMI math — run a full cost comparison over your expected ownership period before choosing FHA over conventional
• Gift fund documentation — improper sourcing of gift funds is a common cause of FHA closing delays