FHA loans
FHA loans — the forgiving option, and what forgiveness costs.
An FHA loan is insured by the Federal Housing Administration, which means the lender takes less risk and can therefore say yes to files conventional underwriting turns down. Lower credit scores, higher debt-to-income ratios, a bankruptcy two years back — FHA has room for all of it.
That insurance is not free. You pay an upfront premium of 1.75% of the loan amount, normally financed into the balance, plus an annual premium collected monthly. On most FHA loans that monthly premium stays for the life of the loan. It is a genuinely reasonable price for buying two years earlier than you otherwise could — as long as you know that is the trade you are making.
Updated
FHA at a glance
- Minimum down
- 3.5% at 580+; 10% at 500–579
- Upfront premium (UFMIP)
- 1.75% of the loan, financeable
- Annual premium
- 0.55% typical above 95% LTV
- MIP duration
- Life of loan above 90% LTV; 11 years at or below
- 2026 one-unit floor
- $541,287
- Occupancy
- Primary residence only
Right for you if
- Credit scores between 580 and 660, where FHA usually beats conventional on total cost
- Higher debt-to-income ratios that conventional automated underwriting will not accept
- Buyers two to three years past a bankruptcy or foreclosure
- Buyers whose down payment is entirely gifted
- Files where a non-occupant co-borrower needs to be added
Know before you commit
- Mortgage insurance is permanent above 90% loan-to-value — the exit is a refinance
- The appraisal holds the property to HUD condition standards; peeling paint and a bad roof become issues
- Primary residence only, so no second homes and no rentals
- Loan limits are lower than conforming: $541,287 for one unit in 2026 in floor counties
- Sellers in a competitive market sometimes discount FHA offers, fairly or not
The three FHA numbers worth memorizing
Three and a half percent down at a 580 credit score. Ten percent down between 500 and 579. And a 1.75% upfront mortgage insurance premium that gets financed into the loan rather than paid at the table. Everything else about FHA is detail; those three set whether the program is on the table at all.
How FHA mortgage insurance actually works
There are two premiums and people conflate them constantly. The upfront premium is 1.75% of the base loan amount, added to your balance at closing. The annual premium — commonly 0.55% of the balance for a 30-year loan above 95% loan-to-value — is divided by twelve and collected with your payment.
| Down payment | Annual premium, typical | How long you pay it |
|---|---|---|
| 3.5% (96.5% LTV) | 0.55% | Life of the loan |
| 5% (95% LTV) | 0.50% | Life of the loan |
| 10% or more (90% LTV or less) | 0.50% | 11 years |
Published FHA guidelines for a 30-year loan. Duration is what people miss: the exit from permanent MIP is a refinance into a conventional loan, not a phone call to the servicer.
Credit: what "forgiving" means in practice
- 580 is the guideline floor for 3.5% down; individual lender overlays can sit higher
- 500 to 579 is possible at 10% down, though few lenders write it
- Chapter 7 bankruptcy: generally two years from discharge
- Chapter 13: possible during the plan with twelve months of on-time payments and trustee approval
- Foreclosure: generally three years, with exceptions for documented extenuating circumstances
- Collections and charge-offs do not automatically have to be paid off, though large balances get scrutiny
The property has to pass, not just you
An FHA appraiser values the house and also checks it against HUD minimum property standards. Chipping paint on a pre-1978 home, a roof with less than two years of life, exposed wiring, missing handrails, an inoperable furnace, a compromised well or septic — any of these can come back as a repair condition that has to be cleared before closing.
This matters west of Charlotte, where a lot of the housing stock is older and a lot of it is on private well and septic. It is not a reason to avoid FHA. It is a reason to walk the house with the condition standards in mind before you write the offer, and to know who is paying for the repairs if they come up.
FHA 203(k): buying a house that needs work
FHA also insures renovation loans. A Limited 203(k) finances up to $35,000 including a contingency reserve for non-structural work — kitchens, baths, flooring, appliances, roof repair. A Standard 203(k) handles larger budgets and structural work. Both are underwritten on what the house will be worth finished rather than what it is worth today.
The honest case for FHA, and against it
FHA is the right answer when it is the loan that gets you approved, or when the credit-score math makes its mortgage insurance cheaper than conventional PMI. It is the wrong answer when your file supports conventional financing and you take FHA anyway because a 3.5% down payment sounded lower than 5%. That is a decision that costs money for as long as you own the house.
FHA loans are insured by the Federal Housing Administration. Mortgage insurance premiums are set by HUD and are subject to change.
In their words
Clients who used fha
Travis is an amazing lender! I always joke I’m going to buy him a cape to wear because he is forever saving a deal!! If you want a lender that’s reliable, PROMPT, knowledgeable and genuinely cares about his customers! I recommend all my buyer clients to Travis!
Being a first time homebuyer, I was nervous about the buying process. Now that it’s all over, I don’t remember stressing during our buying process at all. Travis literally made it stress free. It was almost a hands off process, he did it all! His communication, professionalism, and passion to make your dreams come true is unmatched. I whole heartedly believe he is the best in the business. As long as the world is turning, I’ll be trusting Travis and his team with my lending needs.
Questions
FHA, answered
The FHA guideline is 580 for 3.5% down, and 500 to 579 with 10% down. Lenders can require more than the guideline. Score is only one input — I have closed FHA files in the low 600s that were tighter on debt-to-income than on credit.
Only if you put at least 10% down, in which case it terminates after eleven years. Above 90% loan-to-value the annual premium stays for the life of the loan, and the way out is refinancing into a conventional loan once you have 20% equity.
No. That is the most common FHA misconception. There is no first-time-buyer requirement at all — the only occupancy rule is that the home has to be your primary residence. You generally cannot hold two FHA loans at once, but there are documented exceptions for relocation and family-size changes.
For 2026 the national one-unit floor is $541,287 and the high-cost ceiling is $1,249,125. Most Carolina counties sit at or near the floor, but limits are set county by county, so check yours before you assume — I will pull it for your specific address.
Yes. The full 3.5% can come from an eligible donor — a relative, an employer, a labor union, a charitable organization or a government down payment assistance program — with a gift letter and a documented transfer.
Sometimes, because listing agents worry about the appraisal condition standards. The fix is a pre-approval strong enough to answer the question before it is asked, and an agent who calls the listing agent to walk them through it. I will make that call with your agent.
More in the full mortgage FAQ, or ask me directly.
Fairway Independent Mortgage Corporation is not affiliated with any government agencies. These materials are not from HUD, VA, USDA or FHA, and were not approved by HUD, VA, USDA or any other government agency. This is not an offer to enter into an agreement or a commitment to lend. Not all applicants will qualify. Information and rates are subject to change without notice. All loans are subject to credit review and approval. Program guidelines, fees and loan limits are set by the applicable agency or investor and are subject to change. Fairway Home Mortgage is a division of Fairway Independent Mortgage Corporation. NMLS Entity ID #2289.
Next step
Find out what you qualify for before you shop.
A documented pre-approval takes about 24 hours once your paperwork is in, costs nothing, and tells you whether fha is genuinely your best route.