An FHA loan is a mortgage insured by the Federal Housing Administration (part of HUD) — designed to expand homeownership access with lower credit-score and down-payment requirements than conventional loans. Typical minimums: 580 FICO with 3.5% down, or 500-579 FICO with 10% down.
FHA loans are originated by FHA-approved lenders (banks, credit unions, non-bank mortgage companies) and insured by the FHA — the federal government guarantees the lender against loss if the borrower defaults. This insurance lets lenders accept lower credit profiles and smaller down payments than conventional loans. Key FHA structure: - 580+ FICO: minimum 3.5% down payment - 500-579 FICO: minimum 10% down payment - DTI ratio up to 43% (sometimes 50% with compensating factors) - 2024 FHA loan limits: $498,257 in most counties, $1,149,825 in high-cost areas FHA loans carry MIP (Mortgage Insurance Premium) — both upfront (1.75% of loan amount, financed into the loan) and annual (0.45-1.05% of loan amount, paid monthly). Unlike conventional PMI which drops at 78% LTV, FHA MIP typically lasts the life of the loan if the borrower puts less than 10% down. FHA loans are most useful for: first-time buyers, borrowers with mid-range credit (580-680 FICO), and buyers in markets where housing prices push toward FHA loan limits. The U.S. Department of Housing and Urban Development (HUD) oversees the FHA program — eligibility and loan limit information at hud.gov/buying/loans (https://www.hud.gov/buying/loans). Annual loan limits are published by the FHFA and HUD at hud.gov. The CFPB's guide to FHA loans (https://www.consumerfinance.gov/owning-a-home/loan-options/fha-loans/) explains MIP, down payment requirements, and how FHA compares to conventional mortgages.
FHA program rules allow 500+ FICO with 10% down, or 580+ FICO with 3.5% down. However, individual lenders can set higher minimums ('overlay'). Most FHA lenders require 580+ FICO; some require 620+. Veterans United, Rocket, and other major FHA lenders publish their specific minimums.
If you put less than 10% down: for the life of the loan (until paid off or refinanced). If you put 10%+ down: for 11 years. The lifetime requirement on low-down FHA loans is the main reason many FHA borrowers refinance to conventional once they reach 20%+ equity — to escape the MIP.