The upfront premium
You pay an upfront mortgage insurance premium, usually added to the loan.
FHA loans
FHA loans: a smaller down payment and more flexible credit rules.
An FHA loan is a mortgage on the home you live in, made by a private lender and insured by the Federal Housing Administration, that accepts smaller down payments and lower credit scores than most conventional loans.
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Here is how FHA loans work, the FHA loan requirements for the home, your credit and the down payment, how the mortgage insurance is paid, how gifts and down payment assistance can help, and the FHA Streamline refinance.
- Direct, licensed mortgage lender
- NMLS #103098
- Equal Housing Lender
What would you like to do?
Pick the one closest to you. A few short questions follow, and a licensed loan officer reviews your answers and follows up with you, usually within one business day.
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Fidelity Residential · NMLS #103098 · Equal Housing Lender
- Direct, licensed lenderNMLS #103098. Check our licences on NMLS Consumer Access.
- A licensed loan officerA real person reviews your file and answers your questions.
- For the home you live inFHA loans are for your main residence.
- Apply online or by phoneStart a quote, apply online or call 732-686-9999.
The basics
What an FHA loan is
An FHA loan is made by a private lender and insured by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development (HUD). The government does not lend the money; it insures the lender against loss. In return, you pay mortgage insurance.
Because of that insurance, FHA loans accept smaller down payments and lower credit scores than most conventional loans. The home must be your main residence.
FHA sets a loan limit for each county, and the home must meet HUD’s safety and soundness standards, which the appraiser checks.
Homes FHA can finance
- A house of one to four units, when you live in one of them
- A condominium in a project FHA has approved, or one that receives single-unit approval
- A manufactured home that meets HUD’s rules
Requirements
FHA loan requirements
FHA sets the rules and a lender may add its own. In general terms, this is what an FHA loan asks of you and of the home.
- Your main residence: the home must be where you live, and it must be a house of one to four units, an FHA-approved condominium or a manufactured home that meets HUD’s rules
- A down payment from your own savings, a documented gift or an approved assistance program; FHA’s minimum is smaller than most conventional loans ask for
- Credit that meets FHA’s rules; FHA accepts lower scores than most conventional loans, and it sets waiting periods after a bankruptcy or foreclosure
- Income you can document, so the new payment fits alongside your other monthly debts
- Mortgage insurance: an upfront premium, usually added to the loan, and an annual premium paid with your monthly payment
- The home must meet HUD’s safety and soundness standards and the loan must fit the FHA loan limit for the county
- Residency: U.S. citizens and lawful permanent residents qualify on the same terms
- Not for investors: FHA loans are for the home you live in
FHA loans at a glance
- What it is: a home loan made by a private lender and insured by the Federal Housing Administration.
- Who it is for: buyers and owners of the home they live in, including people with a smaller down payment or a lower credit score than most conventional loans accept.
- What you need: pay stubs and W-2 forms or tax returns, bank statements for the money you bring to closing, a gift letter if family is helping, your purchase contract and photo identification.
- On this page: how FHA mortgage insurance works, the ways to pay the down payment, the steps to closing, the FHA Streamline refinance and FHA 203(k) renovation loans.
Before you make an offer with an FHA loan
The requirements above are about you and the home. These are the things to check about the home itself, before you sign a contract.
- The FHA loan limit for the county where the home is, from your loan officer
- The current property tax bill for the home, from the seller, the listing agent or the town, because taxes are part of the monthly payment and are usually paid through an escrow account
- An insurance quote, with flood insurance if the home needs it
- For a condominium, whether the project meets FHA’s rules; ask early, before you sign a contract
- For a house with more than one unit, your plan to live in one of the units as your main residence
- The condition of the home: the FHA appraiser checks it against HUD’s standards and repairs may be required before closing, so an older home may suit a renovation loan
Mortgage insurance
FHA mortgage insurance, explained
Every FHA loan carries two mortgage insurance premiums. Your loan estimate shows both in dollars.
The annual premium
An annual premium is paid in twelve parts with your monthly payment. With a larger down payment it ends after a set number of years; with a smaller one it lasts for the life of the loan. Refinancing into a different loan later is one way some owners remove it.
Down payment
Paying the down payment and closing costs
FHA lets you use more than your own savings for the money you bring to closing.
Your own money
Savings, checking and other accounts you can document. The source of large deposits is checked.
A documented gift
A gift from a relative or another allowed donor can cover the down payment. You will need a gift letter and a record of the money moving.
Down payment assistance
A down payment assistance program from a government agency that FHA allows can help with the down payment and, in some programs, closing costs. The assistance is usually a second loan with its own terms.
See our down payment assistance programsThe seller may also pay part of your closing costs, up to a limit HUD sets.
How it works
The steps to an FHA loan
Talk and get a quote
A loan officer reviews your income, debts, savings, credit and price range, and explains FHA mortgage insurance and the loan limit for your county.
Apply
After your application, the lender orders an FHA case number, pulls credit and runs the file through FHA’s automated scorecard, which lists the documents needed.
The home is appraised
An FHA appraiser values the home and checks it against HUD’s safety standards. Repairs may be required before closing.
Underwriting and closing
An underwriter checks your documents. You review your closing disclosure and sign. Property taxes and insurance are usually paid through an escrow account.
A worked example, in words. Say you are buying your first home, a condominium you will live in. You have savings for part of the money for closing, and a parent is giving you the rest.
- The home. Your loan officer checks early that the condominium is in a project FHA has approved, or can receive single-unit approval, and that the loan you need fits the FHA loan limit for the county.
- Your credit. FHA sets a minimum credit score, and a lender may set its own. Your loan officer reviews your credit and tells you where you stand.
- Your income and debts. After you apply, the lender orders an FHA case number and runs the file through FHA’s automated scorecard, which lists the documents needed. The new payment has to fit alongside your other monthly debts, from income you can document.
- The money for closing. Your own savings and the gift, with a gift letter and a record of the money moving. The seller may also pay part of your closing costs, up to a limit HUD sets.
- The appraisal. An FHA appraiser values the home and checks it against HUD’s safety standards. Repairs may be required before closing.
- The monthly payment. Principal and interest, the annual mortgage insurance premium, and property taxes and insurance, usually paid through an escrow account; the condominium’s association dues are paid as well. The upfront premium is usually added to the loan.
Your loan estimate shows every one of these in dollars, including both mortgage insurance premiums. The mortgage payment calculator gives a first estimate with your own figures; it is an estimate, not an offer. Buying in New Jersey? See FHA loans in New Jersey.
Already own a home?
FHA refinances and renovation loans
FHA Streamline refinance
Already have an FHA loan? The FHA Streamline refinance needs less paperwork and no appraisal, and it must give you a real benefit.
Refinancing your mortgageRate-and-term and cash-out
FHA can also replace another mortgage to change the rate or the length of the loan, or replace it with a larger one and pay you the difference in cash. The home must be your main residence.
Cash-out refinancesFHA 203(k) renovation loans
Buy or refinance a home and pay for repairs or renovation with the same FHA loan. The money for the work is paid out as it is done.
Renovation loans
Documents
What documents you need
The automated findings list exactly what your loan needs. Most buyers can start with these.
- Recent pay stubs and your W-2 forms
- Tax returns, and if you are self-employed, a year-to-date profit and loss statement
- Bank statements showing the money for the down payment and closing costs
- A gift letter if family is helping with the down payment
- Your signed purchase contract, once you have one
- Photo identification for everyone on the loan
Questions
Common questions about FHA loans
What are the requirements for an FHA loan?
In general terms: the home must be your main residence and meet HUD’s standards, the loan must fit the county loan limit, you need a down payment from savings, a gift or an approved assistance program, credit that meets FHA’s rules, income you can document, and you pay FHA mortgage insurance. See the FHA loan requirements above.
What credit score do I need for an FHA loan?
FHA sets a minimum credit score, and a lender may set its own. FHA accepts lower scores than most conventional loans. A loan officer can tell you where you stand after reviewing your credit.
Are FHA loans only for first-time buyers?
No. Any buyer can use an FHA loan, as long as the home will be their main residence and the loan fits FHA’s rules and the county loan limit.
Does the government lend me the money?
No. A private lender makes the loan, and the Federal Housing Administration insures it.
Can a permanent resident get an FHA loan?
Yes. Lawful permanent residents can qualify on the same terms as U.S. citizens.
Can I get an FHA loan after a past credit problem?
Sometimes. FHA sets waiting periods after events such as a bankruptcy or foreclosure, and the lender looks at how your credit has been handled since. Tell your loan officer about it at the start.
Where can I get help with the down payment?
A documented gift or an approved government assistance program can help. See our down payment assistance programs.
How much do I need for a down payment on an FHA loan?
FHA’s minimum down payment is smaller than most conventional loans ask for. It can come from your own savings, a documented gift or an assistance program FHA allows, and the seller may pay part of your closing costs, up to a limit HUD sets. Your loan officer works out the figure for the home you are buying and your credit.
Does FHA mortgage insurance ever end?
There are two premiums. The upfront premium is paid once, usually added to the loan. The annual premium is paid with your monthly payment: with a larger down payment it ends after a set number of years, and with a smaller one it lasts for the life of the loan. Refinancing into a different loan later is one way some owners remove it. See FHA mortgage insurance, explained.
Should I use an FHA loan or a conventional loan?
FHA accepts smaller down payments and lower credit scores than most conventional loans, and every FHA loan carries mortgage insurance. If your credit and savings could fit a conventional loan as well, ask for both and compare the two loan estimates side by side for the same home.
Can I buy a condo with an FHA loan?
Yes, if it will be your main residence and the condominium is in a project FHA has approved, or receives single-unit approval. Ask your loan officer to check the project early, before you sign a contract. A condo you will rent out or use for part of the year is not eligible.
Can I buy a house with more than one unit?
Yes. FHA can finance a house of one to four units when you live in one of them as your main residence. A home you will rent out, or use only for part of the year, is not eligible; see investment property loans.
What if the home needs repairs?
The FHA appraiser values the home and checks it against HUD’s safety and soundness standards, and repairs may be required before closing. If the home needs more work, an FHA 203(k) renovation loan can buy the home and pay for repairs or renovation with the same loan, with the money for the work paid out as it is done. See renovation loans.
What is the FHA loan limit for my county?
FHA sets a loan limit for each county, and your loan must fit the limit for the county where the home is. Your loan officer gives you the current figure for the county where you are buying, before you start making offers.
Do you lend in my state?
Fidelity Residential is licensed in many states. The full, current list is on NMLS Consumer Access (opens in a new tab), or call us at 732-686-9999.
Sources: Consumer Financial Protection Bureau, FHA loans (opens in a new tab); Consumer Financial Protection Bureau, What is an FHA loan? (opens in a new tab); U.S. Department of Housing and Urban Development, FHA Single Family Housing Policy Handbook 4000.1 (opens in a new tab). Facts are stated in our own words.
Ready to talk about an FHA loan?
Get a quote, apply online, or talk it through with a licensed loan officer.
What happens next
- Tell us about your loan. A few quick questions about the property and the loan you want. No credit check to start and no obligation.
- A licensed loan officer reviews your answers and follows up with you, usually within one business day.
- This is a request for a quote, not a loan application and not a commitment to lend.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on credit, income, property and underwriting review and are subject to change without notice.
Reviewed by Robert Shamie, CEO, NMLS #241428 · Last reviewed:
Fidelity Residential (PFN Lending Group, Inc., NMLS #103098) is a direct mortgage lender licensed in 40 states and the District of Columbia, with 26 years in business.