FHA Loans: What to Know in 2024

An FHA loan is a mortgage insured by the Federal Housing Administration. FHA loans are helpful for buyers with limited savings or lower credit scores.
Abby Badach Doyle
By Abby Badach Doyle 
Updated
Edited by Alice Holbrook Reviewed by Michelle Blackford

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Nerdy takeaways
  • FHA loans allow down payments as low as 3.5% with a 580 FICO or 10% with a 500 FICO.

  • The federal government insures FHA loans, but the loans are issued by private lenders.

  • Mortgage insurance is required on all FHA loans, even if you put 20% down, but the amount and duration vary.

  • The home must undergo an FHA appraisal and meet government standards for health and safety.

What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development. With a minimum 3.5% down payment for borrowers with a credit score of 580 or higher, FHA loans are often a good fit for first-time home buyers or people with little savings or credit challenges.

You could still qualify for an FHA loan even if you don’t meet the requirements for a conventional mortgage or if you had a bankruptcy.

The federal government doesn’t issue FHA loans, but it does insure them. That insurance protects lenders in case of default, which is why FHA lenders are willing to offer favorable terms to borrowers who might not qualify for a conventional home loan.

FHA loans are issued by private, FHA-approved lenders, including many banks, credit unions and nonbanks (a type of lender).

An FHA home loan can be used to buy or refinance numerous types of homes, including:

Specific types of FHA loans can also be used to finance new construction or renovate an existing home. However, all properties — existing or new construction — must undergo an FHA appraisal. If the property meets government standards, then you can use an FHA loan to buy (or refinance) it.

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