FHA Loan

What Is an FHA Loan?

FHA loans are government-insured loans backed by the Federal Housing Authority. They are designed for low- to moderate-income earners and typically come with the lowest down payments.

For 2023, the FHA floor is set at $472,030 for single-family home loans. While this amount varies by county, this minimum lending amount covers 80% of all U.S. counties.

FHA Loan Qualifications

Because FHA loans are designed for lower-income earners, qualifying for this type of financing is easier than many other loan types. Higher debt-to-income ratios are allowed, and borrowers need only a 3.5 percent down payment. Borrowers can have as low as a 580 credit score and still qualify for an FHA loan.

Who Should Get an FHA Loan?

FHA loans are best for borrowers who:

  • Are first-time homebuyers
  • Have less than perfect credit
  • Have little saved for a down payment
  • Have high debt-to-income ratios
  • Are receiving gift money for their down payment
Pros and Cons of FHA Loans
  • Low down payment
  • Competitive interest rates
  • Higher debt-to-income ratios allowed
  • Lower credit scores allowed
  • Lower loan limits
  • Mortgage insurance is required