What Is FHA Loan?
A government-insured mortgage with low down payment (3.5%) and easier credit requirements.
Definition
FHA loans are insured by the Federal Housing Administration but originated by regular lenders. They are popular with first-time buyers because they allow 3.5% down with credit scores as low as 580 (or 10% down with scores 500-579). Trade-off: you pay an upfront mortgage insurance premium (1.75% of the loan) plus annual MIP that does not drop off automatically. For most borrowers staying in the home long-term, refinancing to a conventional loan once they hit 20% equity makes sense.
Example
Buying a $300,000 home with FHA: 3.5% down = $10,500. Monthly MIP at 0.55%/year = $135 on the loan amount.
Use It
Try the Mortgage CalculatorRelated Terms
Conventional LoanA mortgage not backed by the federal government, conforming to Fannie Mae or Freddie Mac guidelines.VA LoanA mortgage guaranteed by the Department of Veterans Affairs, available to active military, veterans, and some spouses.Down PaymentThe cash you pay upfront when buying a home, separate from the mortgage loan amount.