What is the FHA?

What is the FHA?

Published | Written by Sarah McCormick

Buying a home for the first time can be overwhelming, especially thinking about the huge costs that come with it. However, it doesn’t have to be, there are programs available to first-time buyers that can help make the purchase more approachable.

One of the ways that makes purchasing a home more approachable is an FHA insured loan. FHA stands for Federal Housing Administration (who insures the loans), and the loan itself is issued by an FHA-approved lender. These loans are generally associated with first-time buyers because typically, the buyer can qualify with a lower credit score and can put less money down.

Along with the FHA loan, a buyer will also need to pay MIP (Mortgage Insurance Premiums). There is an initial MIP charge, calculated as a percentage (1.75% in 2020) of the base loan amount, which can be rolled into the loan or paid at closing. There is also a monthly PMI that is calculated based on the loan amount, length of the loan, and how much you put down. In 2020 the MIP was typically around 0.85% of the loan amount.



Minimum Credit Score



Down Payment

3.5% with credit score of 580+ and 10% for credit score of 500 to 579

3% to 20%

Loan Terms

15 or 30 years

10, 15, 20, or 30 years

Mortgage Insurance

Upfront MIP + Annual MIP for either 11 years or the life of the loan,
depending on LTV and length of loan

None with down payment of at least 20% or after loan is
paid down to 78% LTV

Mortgage Insurance Premiums

Upfront: 1.75% of the loan + Annual: 0.45% to 1.05%

PMI: 0.5% to 1% of the loan amount per year

Down Payment Gifts

100% of down payment can be a gift

Only part can be a gift if down payment is less than 20%?

Down Payment Assistance Programs



Source: Federal Housing Administration (FHA) Loan

To find out if you qualify for an FHA loan, or to see if an FHA loan is a good fit for you, start a conversation with your lender to see what would be best for you. Have a question about this article? Reach out directly to Sarah Leland, or leave your question or comment below!

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