What Is an FHA Loan?

A Federal Housing Administration (FHA) loan is a government-backed mortgage insured by the FHA and regulated by the U.S. Department of Housing and Urban Development (HUD). While FHA loans are insured by the government, the loan itself is issued and funded by an approved lender.

FHA loans were designed to help borrowers, especially those with lower credit scores or limited savings, become homeowners. They offer more flexible qualification requirements, making them a popular option for first-time homebuyers as well as repeat buyers.

FHA loans aren’t limited to single-family homes. They can also be used to finance approved condominiums and multi-family properties (such as 2-, 3-, or 4-unit homes), as long as the borrower lives in one of the units as their primary residence.

how much can you borrow with an fha loan?

FHA loan limits are updated annually and vary by county and state, based on local home prices. This means the maximum amount you can borrow with an FHA loan depends on where the property is located.

Instead of having one nationwide limit, FHA loan limits are adjusted each year to reflect current housing market conditions. Some higher-cost areas may qualify for higher loan limits than others.

If you’d like to see the current FHA loan limits for your area, you can look them up by state and county on HUD’s official website here.

Pros

• FHA loans can also be great for 1st time home buyers and  recurring home buyers 
• It was created to help low-income families become homeowners.
• FHA loans have more flexible requirements like you can qualify with a lower credit score (500).

Cons

• FHA loans require the borrower's home its primary residence.  
• If approved, borrowers will be required to do an upfront cost of Mortgage Insurance Premium (MIP). Typically, the cost will be 1.75% of the loan amount. Psst... You have the option to roll that cost into the financed loan amount.
• It may be hard to convince a seller to take your offer if you have an FHA loan because FHA loans have stricter standards for the seller for property upkeep.  

who is an fha loan best for? 

An FHA loan may be a good fit for borrowers who have lower credit scores, limited savings for a down payment, or a less established credit history. FHA loans are often used by first-time homebuyers, but they can also be a strong option for repeat buyers who want more flexible qualification requirements.

If you’re deciding between an FHA loan and a conventional loan, check it out here >