What is an FHA loan?
An FHA loan is insured by the Federal Housing Administration, designed for first-time buyers and those with less-than-perfect credit. Features include 3.5% minimum down payment (580+ credit), lenient credit requirements (500+ with 10% down), and competitive rates. Requires both upfront MIP (1.75%) and annual MIP (0.15-0.75%).
What is FHA mortgage insurance premium (MIP)?
FHA MIP has two parts: upfront MIP (1.75% of loan, rolled into loan) and annual MIP (0.15-0.75% of balance, paid monthly). With less than 10% down, annual MIP is for the life of the loan. With 10%+ down, MIP can be removed after 11 years.
What credit score do I need for an FHA loan?
580+ for 3.5% down, 500-579 for 10% down. Below 500 generally won't qualify. Many lenders prefer 620+. More forgiving of past issues like bankruptcies (2 years) and foreclosures (3 years).
Can I remove FHA MIP?
For loans after June 2013: less than 10% down = MIP for life. 10%+ down = cancelable after 11 years. Many borrowers refinance to conventional to eliminate MIP once they have 20% equity.
What is the maximum FHA loan amount?
Varies by county. Floor: $524,225. Ceiling (high-cost areas): $1,209,750. Set at 115% of area median home price. Check HUD.gov for your county's limit.
FHA vs conventional loan?
FHA: 3.5% down, 580+ credit, MIP for life. Conventional: 3-20% down, 620+ credit, PMI removable at 20% equity. FHA is better with low credit/low down. Conventional is cheaper overall with good credit and 20% down.
Can I use an FHA loan for investment property?
No, FHA loans are for owner-occupied primary residences only. Must move in within 60 days and live there at least 1 year. Can be used for 1-4 unit properties if you occupy one unit.
FHA loan requirements for self-employed?
2 years self-employment history, tax returns, P&L statements, bank statements. Income calculated from net taxable income. Same DTI requirements: ideally 43% or less, up to 50% with compensating factors.