Estimate your monthly payment with FHA loan terms, including mortgage insurance.
Open Calculator →Last reviewed: March 2026
An FHA loan is a mortgage insured by the Federal Housing Administration. The FHA doesn't lend money directly — instead, it insures loans made by approved lenders, which reduces the lender's risk and allows them to offer more favorable terms to borrowers.
FHA loans were created in 1934 to help Americans become homeowners during the Great Depression. Today, they're one of the most popular options for first-time homebuyers because of the low down payment requirement and more lenient credit standards.
I used an FHA loan to buy my first home. At the time, I had a 640 credit score and only enough saved for a 3.5% down payment. A conventional loan would have required 5-10% down and a higher credit score, so the FHA loan was my best option.
To qualify for an FHA loan, you must meet the following requirements:
Lenders may have additional requirements beyond the FHA minimums. Shop around and compare offers from multiple lenders.
The minimum down payment for an FHA loan depends on your credit score:
The down payment can come from your own savings, a gift from a family member, a grant from a state or local housing program, or a combination of these sources.
Gift funds are a common way to cover the down payment. The donor must provide a gift letter stating that the money is a gift and doesn't need to be repaid. The donor cannot be anyone with an interest in the sale of the property (like the seller or real estate agent).
My down payment was a combination of my own savings ($2,000) and a gift from my parents ($6,500). The gift letter process was straightforward — my parents wrote a letter, provided their bank statements showing the withdrawal, and that was it.
FHA loans require two types of mortgage insurance:
This is 1.75% of the loan amount and is typically rolled into the loan (not paid out of pocket). For a $300,000 loan, the UFMIP would be $5,250, making your total loan amount $305,250.
This is paid monthly as part of your mortgage payment. The annual MIP rate depends on your loan term, down payment, and loan amount. For most borrowers (30-year term, less than 10% down), the annual MIP is 0.55% of the loan amount divided by 12 months.
For a $300,000 loan with 3.5% down, the monthly MIP would be about $137.50.
If you put down less than 10%, the MIP stays for the life of the loan — you cannot remove it. If you put down 10% or more, the MIP is removed after 11 years.
This is a key difference from conventional loans, where you can remove private mortgage insurance (PMI) once you reach 20% equity. If you plan to stay in the home long-term, an FHA loan with less than 10% down will cost you more in mortgage insurance over time.
I refinanced from an FHA loan to a conventional loan after 4 years when I had built up 20% equity. This removed the monthly MIP and saved me about $140 per month.
FHA loan limits vary by county and are based on 115% of the median home price in the area. The limits are updated annually. For 2026, the FHA loan limits are:
You can check the FHA loan limit for your county on the HUD website. The limits are higher for multi-unit properties (2-4 units).
If the home you want to buy exceeds the FHA loan limit for your area, you'll need to make a larger down payment or consider a conventional loan or jumbo loan.
The property you buy with an FHA loan must meet the FHA's minimum property requirements (MPRs). These are designed to ensure the home is safe, sound, and structurally sound. Key requirements include:
If the home doesn't meet MPRs, the seller must make repairs before the loan can close. Some repairs can be negotiated as part of the sale; others may be a deal-breaker.
When I bought my first home, the FHA appraiser required the seller to fix a handrail on the stairs and repaint some peeling exterior wood. The seller agreed to make the repairs, and the loan proceeded without issue.
The process for applying for an FHA loan is similar to any other mortgage:
The entire process typically takes 30-60 days from offer acceptance to closing.
Here's a quick comparison of FHA and conventional loans:
If you have a credit score above 680 and can make a 10-20% down payment, a conventional loan is usually the better option because you can avoid mortgage insurance sooner. If you have a lower credit score or limited savings for a down payment, an FHA loan may be your best path to homeownership.
FHA loans have helped millions of Americans become homeowners. The low down payment requirement and lenient credit standards make them an attractive option for first-time buyers and those with limited savings.
However, the mortgage insurance can add up over time, especially if you put down less than 10%. If you plan to stay in the home long-term, factor in the cost of MIP when deciding between an FHA loan and a conventional loan.
My FHA loan got me into my first home when I didn't have enough savings for a conventional loan. Four years later, I refinanced into a conventional loan and eliminated the mortgage insurance. The FHA loan was the right choice for me at the time, and it might be the right choice for you too.