What Is an FHA Loan?
An introduction to FHA financing: how it works, the down payment, mortgage insurance, and where it may fit into your homebuying plan.
An FHA loan is a mortgage made by an approved lender and insured by the Federal Housing Administration. The FHA provides the insurance; it does not lend you the money directly.
For a homebuyer, that insurance helps make financing available with a smaller down payment and more flexible credit requirements than some other options. FHA can be useful for a first home, but it is not limited to first-time buyers.
How much is the down payment?
Eligible borrowers can make a down payment as low as 3.5%. The down payment is only one part of the cash needed to buy a home. Closing costs, prepaid expenses, and any required reserves also need to be considered.
I’ll help you work through the full amount needed to close and review eligible sources of funds, including gift funds or assistance where available.
What about mortgage insurance?
Most FHA purchase loans have an upfront mortgage insurance premium and an annual premium collected through the monthly payment. The upfront premium can generally be financed into the loan, which increases the amount borrowed.
Mortgage insurance affects both your payment and your total borrowing costs. How long it remains depends on the loan terms and the down payment. We’ll include it when comparing FHA with other financing options.
What kind of home can you buy?
FHA purchase financing is intended for a primary residence. Eligible properties can include a single-family home and certain two-to-four-unit properties when you live in one of the units. The property must meet the applicable FHA requirements.
Is qualifying only about your credit score?
No. Credit is part of the review, along with income, debts, available funds, and the property. Individual lenders can also have requirements beyond FHA’s guidelines. A flexible credit standard does not mean automatic approval.
Is FHA the right choice for you?
That depends on your finances and your plans. A smaller down payment can be helpful, but the monthly payment, mortgage insurance, closing costs, and available alternatives all deserve a look.
My role is to compare those details with you. We can review FHA alongside Conventional and other applicable options, then build a financing strategy around the home you want and the payment you’re comfortable with.
Schedule a consultation with Josias →
Josias Jordan
Mortgage Strategist · NEXA Lending
NMLS #2358988
I help buyers, homeowners, and investors compare financing options and plan their next move.
Let’s talk about your plans →