FHA Loan
Flexible Financing With a Lower Down Payment
FHA loans are government-backed mortgages insured by the Federal Housing Administration. Because they allow down payments as low as 3.5%* and accept credit scores starting at 500, they're one of the most accessible paths to homeownership. These loans work best for buyers who have limited savings, recovering credit, or both.
However, accessibility comes with trade-offs. Every FHA mortgage carries mandatory mortgage insurance that typically lasts the entire life of the loan. So before you commit, it's worth understanding exactly what you're signing up for.
How FHA Loans Work
The FHA doesn't lend money directly. Instead, it insures the loan, which protects the lender if you stop making payments. Because of this insurance, lenders are willing to approve borrowers who might not qualify for a conventional loan.
You still apply through a private lender or mortgage broker. Your lender underwrites the loan using FHA guidelines, and the FHA provides the insurance backing. According to HUD, the FHA insured 767,820 single-family forward mortgages in fiscal year 2024, maintaining its position as one of the most critical entry points for homebuyers in the current market.
FHA Mortgage Insurance: What You'll Pay
Every FHA loan requires two types of mortgage insurance premiums (MIP). First, there's an upfront MIP of 1.75% of the base loan amount, which is typically financed into the loan. Then there's an annual MIP, which was lowered in 2023 to 0.55% for most standard 30-year loans and remains at that level for 2026.
If you put less than 10% down, annual MIP stays for the entire life of the loan. It doesn't drop off automatically the way private mortgage insurance (PMI) can with conventional loans. For most FHA borrowers, the only way to remove MIP is by refinancing into a conventional loan once they've built enough equity and improved their credit.
FHA Loan Limits
Loan limits vary by county and are updated annually by HUD. Below are the 2026 limits for one-unit properties.
| Area Type | 2026 Loan Limit (1-Unit) |
|---|---|
| Standard (Floor) | $541,287 |
| High-Cost (Ceiling) | $1,249,125 |
2026 FHA limits in major hubs like Denver, Colorado Springs, and Miami-Dade often sit between these two extremes. If your target home price exceeds your county's FHA limit, you may need to explore jumbo financing or a conventional loan with a larger down payment.
2026 FHA Limits: Top Colorado & Florida Counties
While the baseline is $541,287, many of our primary service areas have higher limits based on local home prices.
| County (State) | 2026 1-Unit Limit |
|---|---|
| El Paso County (CO) | $541,287 |
| Denver & Douglas County (CO) | $832,750 |
| Palm Beach & Miami-Dade (FL) | $687,700 |
| Summit & Eagle County (CO) | $1,249,125 |
FHA Loan Requirements
| Requirement | FHA Guideline |
|---|---|
| Credit Score (3.5% down) | 580 or higher |
| Credit Score (10% down) | 500 to 579 |
| Debt-to-Income Ratio | Up to 43% (sometimes higher with compensating factors) |
| Occupancy | Primary residence only |
| Employment History | 2 years of steady income, typically |
| Upfront MIP | 1.75% of base loan amount |
| Annual MIP | 0.55% for most 30-year loans |
Self-Employed or Complex Income?
FHA guidelines can work for self-employed borrowers, but documentation requirements are thorough. You'll generally need two years of tax returns and profit-and-loss statements. If your income situation is nontraditional, take a look at our self-employed and complex income page for more detail on how different loan programs handle that.
FHA Checklist: Self-Employed & Complex Income
To move your FHA file fast in 2026, we typically need these documents upfront to verify your income and business stability:
- Tax Returns: Last 2 years of complete personal and business federal tax returns.
- Profit & Loss: A current year-to-date Profit & Loss (P&L) statement.
- Bank Statements: Business bank statements for the last 3 to 6 months.
- Business Verification: Documentation proving business ownership for at least 2 years.
Because FHA mortgage insurance is usually permanent, we also help our clients monitor their home's value so they can refinance into a conventional loan as soon as they reach 20% equity.
Property Types Eligible for FHA Loans
FHA loans cover more than just single-family homes. The property must be your primary residence and pass a HUD-standard appraisal.
|
🏠 Single-Family Homes |
🏘️ 2–4 Unit Properties |
🏢 FHA-Approved Condos |
|
🏭 Manufactured Homes |
🏗️ New Construction |
🔧 FHA 203(k) Rehab |
FHA Loan Pros and Cons
- Down payment as low as 3.5%*
- Credit scores accepted from 500
- Sellers can cover up to 6% of closing costs
- Gift funds allowed for the entire down payment
- Streamline refinance available later with less paperwork
- MIP lasts the life of the loan (with less than 10% down)
- Upfront MIP of 1.75% adds to loan balance
- Stricter property appraisal standards
- Primary residence only, no investment properties
- Often costlier than conventional for buyers with 700+ credit
Ready to Talk? We're Real People.
You probably have questions about MIP, credit requirements, or whether FHA is the right fit. A quick conversation can clear things up faster than another hour of reading.
Talk to a Real Loan OfficerBorrower Scenario: How an FHA Mortgage Looks in Practice
Meet Sarah: First-Time Buyer, 610 Credit Score
Sarah has a credit score of 610 and $15,000 saved. She's looking at a home listed for $300,000. Because her score is above 580, she qualifies for the 3.5%* minimum down payment.
Her down payment comes to $10,500, which leaves a base loan of $289,500. The upfront MIP of 1.75% ($5,066) is financed into the loan, bringing her total loan amount to approximately $294,566.
At a 6.500%* interest rate, her estimated monthly principal and interest payment is about $1,862*. With annual MIP of roughly $135 per month added on top, she's looking at around $1,997* before taxes and insurance.
Although a conventional loan might have lower long-term costs for someone with a 740 score, Sarah's credit makes FHA the more realistic option right now. As a result, she gets into a home with less cash upfront while she works on building her credit for a future refinance. Try running your own numbers with our mortgage calculator.
When a Different Loan Program Fits Better
FHA loans aren't the best option for everyone. Sometimes another program will save you money or give you more flexibility.
If your credit score is 700 or higher: A conventional loan often costs less over time because private mortgage insurance can be removed once you reach 20% equity. With FHA, you're stuck with MIP unless you refinance.
If you're a veteran or active military: VA loans require zero down payment and have no monthly mortgage insurance at all. For eligible borrowers, it's almost always the better choice.
If you're buying in a rural area: USDA loans also offer zero down payment with lower mortgage insurance costs than FHA, as long as the property and your income meet USDA eligibility requirements.
Not sure which program works best? Our mortgage loan programs page walks through every option side by side.
Get Honest Answers From Someone Who Knows
FHA rules can be confusing, especially the mortgage insurance details. A real conversation with a loan officer will give you clearer answers than any website can.
Ask a Real QuestionFHA Loan FAQs
FHA Loan Disclaimer
Advertising Disclosure: Example based on a $300,000 purchase price with 3.5% down ($10,500) and a credit score of 610. Base loan amount of $289,500, plus financed upfront MIP of $5,066 (1.75%), for a total loan amount of approximately $294,566. Lender underwriting fee of $1,095 applies. Interest rate of 6.500% with an Annual Percentage Rate (APR) of 6.653%. Loan term is 30 years with 360 monthly payments. Estimated monthly principal and interest payment of $1,862. Annual MIP of approximately $135 per month is also required, bringing the estimated monthly obligation to $1,997 before taxes and homeowner's insurance. PMI does not apply to FHA loans; however, both upfront and annual MIP are required as described above. Actual rates, terms, and program availability may vary based on creditworthiness, loan amount, property type, and market conditions. Not all applicants will qualify for the rates or terms shown. Taxes, homeowner's insurance, and any HOA fees are not included in the payment estimate above. Rates and terms are subject to change without notice.