How an FHA loan works
The FHA does not lend money directly. Instead, it insures the loan, which lets lenders offer better terms to borrowers who would not qualify for a conventional loan. You apply with a TouchPoint loan officer, we underwrite the loan, and the FHA insurance protects the lender if you default.
FHA loan requirements
- Down payment: 3.5% with a 580+ FICO score, 10% with a 500 to 579 FICO
- Credit score: 500 minimum, but most lenders require 580+ for the 3.5% option
- Debt-to-income ratio: Generally under 43%, with flexibility for compensating factors
- Property: Must be your primary residence
- Loan limits: Published annually by HUD and varied by county and property type; verify the current limit before applying
Mortgage insurance premium (MIP)
FHA loans require an upfront MIP (1.75% of the loan amount, can be rolled into the loan) and an annual MIP (0.45% to 1.05% depending on loan term and amount, paid monthly). For most borrowers, MIP stays for the life of the loan. If you put 10% or more down, MIP drops off after 11 years.
FHA vs conventional
FHA loans are easier to qualify for but more expensive over time due to MIP. Conventional loans are cheaper if you have 20% down, and PMI can be removed. If you have strong credit and can put 20% down, conventional wins. If your credit is lower or your down payment is smaller, FHA wins.
FHA loan limits
FHA limits are published annually and vary by county and property type. Check the current HUD limit for the subject county before relying on a loan amount; the applicable limit may change after this page is published.
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