FHA Loans
Who Is This Loan For?
- First-time homebuyers with limited savings
- Borrowers with credit scores between 580-680
- Buyers recovering from bankruptcy or foreclosure
- Those who received a down payment gift from family
- Homebuyers with higher debt-to-income ratios
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, designed to help borrowers who may not qualify for conventional financing. It’s one of the most popular loan programs in the country, especially among first-time buyers.
The FHA doesn’t lend money directly - it insures the loan, which reduces the lender’s risk. This government backing is why FHA loans can accept lower credit scores, smaller down payments, and higher debt-to-income ratios than conventional loans. The tradeoff is mortgage insurance, which you’ll pay for the life of the loan in most cases.
FHA loans are available nationwide through FHA-approved lenders. Buying in Charlotte, Tampa, or anywhere else in the country, the program works the same way. For a full walkthrough, see our FHA Loan Complete Guide or the First-Time Homebuyer Guide.
Not sure if FHA is the right fit? Take the 2-minute quiz or book a free consultation.
FHA Loan Requirements
FHA qualification standards are more flexible than conventional loans, but there are still clear guidelines to meet.
Credit score: The minimum credit score for an FHA loan is 500. Borrowers with a score of 580 or higher qualify for the standard 3.5% down payment. Borrowers with scores between 500-579 can still qualify but must put at least 10% down.
Down payment: 3.5% minimum with a 580+ credit score. The entire down payment can come from a gift - from family, an employer, or an approved down payment assistance program. This is a major advantage over some conventional programs.
Debt-to-income ratio (DTI): FHA allows DTI ratios up to 50% in some cases, though 43% is the standard guideline. This higher allowance helps buyers in expensive markets or those with student loan debt.
Employment: Two years of employment history, similar to conventional. Gaps need to be explained but don’t automatically disqualify you.
Property requirements: The home must be your primary residence (no investment properties), and it must pass an FHA appraisal, which is slightly stricter than a conventional appraisal - the FHA appraiser checks for health and safety issues in addition to value.
FHA Mortgage Insurance Premium (MIP)
FHA loans require two types of mortgage insurance: an upfront MIP of 1.75% of the loan amount (typically rolled into the loan) and an annual MIP paid monthly. For most borrowers with a 30-year term and less than 5% down, the annual MIP rate is 0.55%. Rates range from 0.15% to 0.75% depending on your loan amount, term, and down payment size.
If you put less than 10% down, MIP lasts the life of the loan. If you put 10% or more down, MIP is automatically removed after 11 years. Unlike PMI on conventional loans, FHA MIP cannot be removed simply by reaching 20% equity - to eliminate it early, you’d need to refinance into a conventional loan.
FHA Loan Limits
FHA loan limits vary by county and are updated annually. For 2026:
Floor (most areas): $541,287 for a single-family home Ceiling (high-cost areas): $1,249,125
Limits are higher for multi-unit properties (duplexes, triplexes, fourplexes). You can look up the exact limit for any county at HUD’s website.
For reference, North Carolina counties typically fall at or near the floor, while some Florida counties (particularly in South Florida) have higher limits due to elevated home prices.
FHA vs. Conventional: A Detailed Comparison
| Feature | FHA | Conventional |
|---|---|---|
| Min. Credit Score | 580 (3.5% down) / 500 (10% down) | 620 |
| Min. Down Payment | 3.5% | 3% (first-time buyers) |
| Mortgage Insurance | MIP - usually permanent | PMI - cancellable at 20% equity |
| Upfront Insurance Fee | 1.75% of loan amount | None |
| Max DTI | Up to 50% | Up to 45-50% |
| Property Types | Primary residence only | Primary, second home, investment |
| Loan Limits | $541,287-$1,249,125 | $832,750-$1,249,125 |
| Gift Funds | 100% of down payment | Allowed with restrictions |
| Appraisal | Stricter (health/safety) | Standard valuation |
Bottom line: FHA is the better choice when your credit is below 680 or you have minimal savings. FHA MIP can be removed after 11 years if you put 10% or more down, but for most FHA borrowers who put 3.5% down, MIP lasts the life of the loan. Once your credit improves and you build equity, refinancing into a conventional loan to drop MIP is a smart long-term strategy.
The FHA Loan Process
The process mirrors a conventional loan with a few differences:
Step 1 - Pre-approval. We review your financial profile and determine your FHA eligibility. You’ll receive a pre-approval letter within 1-2 business days.
Step 2 - Home search. Find a home that will be your primary residence. Keep in mind the FHA appraisal will check for health and safety issues - major peeling paint, missing handrails, faulty wiring, or other hazards may need to be fixed before closing.
Step 3 - FHA appraisal. The FHA-approved appraiser determines the home’s value AND confirms it meets minimum property standards. This is slightly more involved than a conventional appraisal.
Step 4 - Underwriting. FHA underwriting follows HUD guidelines. The process typically takes 2-3 weeks.
Step 5 - Closing. Sign your paperwork, pay closing costs (2-5% of the loan amount), and get the keys. The UFMIP is typically rolled into the loan. Total timeline: 30-45 days.
Not sure how much home you can afford? Use our affordability calculator.
Frequently Asked Questions
What credit score do I need for an FHA loan?
500 is the minimum. With a score of 580 or higher, you qualify for 3.5% down. Scores between 500-579 require 10% down.
Can I use an FHA loan for a second home or investment property?
No. FHA loans are strictly for primary residences - the home you live in as your main address. For second homes or investment properties, you’ll need a conventional loan . For investment properties specifically, consider a DSCR loan - no personal income verification required.
Can I use an FHA loan to buy a duplex or multi-unit property?
Yes. FHA loans allow you to purchase 2-4 unit properties as long as you live in one of the units as your primary residence. The rental income from the other units can help you qualify for the loan - a strategy often called “house hacking.” FHA loan limits are higher for multi-unit properties.
How do I get rid of FHA mortgage insurance?
If you put less than 10% down, the only way to remove MIP is to refinance into a conventional loan once you have at least 20% equity and a credit score of 620+. If you put 10% or more down at purchase, MIP is automatically removed after 11 years. The annual MIP rate is 0.55% for most borrowers, though rates range from 0.15% to 0.75% depending on loan term, amount, and down payment.
What is the FHA loan limit in my area?
Limits vary by county. The 2026 floor is $541,287 and the ceiling is $1,249,125. Most counties in North Carolina and much of Florida fall at or near the floor. You can look up your specific county at the HUD website .
Can I buy a fixer-upper with an FHA loan?
A standard FHA loan requires the home to meet minimum property standards at closing. For homes that need significant repairs, the FHA 203(k) rehabilitation loan lets you finance both the purchase and renovations in a single mortgage.
Can my entire down payment be a gift?
Yes - FHA allows 100% of the down payment to come from an acceptable gift source, including family members, employers, and approved down payment assistance programs. This is one of FHA’s biggest advantages for first-time buyers.
How long after bankruptcy can I get an FHA loan?
Two years after a Chapter 7 discharge, or one year into a Chapter 13 repayment plan (with court approval). Foreclosure requires a three-year waiting period. These are shorter waiting periods than conventional loans require.
Can I build a new home with an FHA loan?
Yes - FHA offers construction loan programs with as little as 3.5% down. These one-time close loans finance the build and automatically convert to a permanent FHA mortgage when construction is complete.
Can I refinance my existing FHA loan?
Yes. The FHA Streamline refinance lets you lower your rate with minimal documentation and no appraisal in most cases. You can also refinance into a conventional loan once you have 20% equity to drop MIP entirely.
Are FHA loans assumable?
Yes. FHA loans are assumable, meaning a future buyer could take over your mortgage at its original interest rate (subject to lender approval and FHA qualification). In a high-rate environment, this can make your home more attractive to buyers when you’re ready to sell.
