I’m Scott Swinford, a mortgage loan originator (NMLS# 138422) licensed in Indiana, Illinois, and Michigan. I have been a loan officer for more than 20 years. Here is how FHA loans work, who they fit, and how they compare to your other options.
What Is an FHA Loan?
An FHA loan is made by an FHA-approved lender and insured by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development. That insurance protects the lender, which allows more flexible credit and down payment rules than most conventional loans.
FHA loans are for homes you will live in. You can buy a single-family home, an FHA-approved condo, or a building with up to four units when you live in one of them. You generally need to move in within 60 days of closing and live there for at least a year.
Who Qualifies?
- Credit score. The minimum credit score for the FHA loans I offer is 580. Learn why your mortgage credit score can differ from the one you see online.
- Down payment. At least 3.5% of the purchase price.
- Steady income. Lenders look for income you can document and expect to continue.
- Debt-to-income ratio. FHA allows more room here than many conventional loans, but your monthly debts plus the new house payment still must fit within program limits.
- Loan amount. FHA sets loan limits by county. Look up yours with the HUD FHA loan limit search.
Gifts and Seller Help
- Gift funds. Family members and certain other approved sources can give you money for the down payment and closing costs. The gift has to be documented with a gift letter and a record of the transfer.
- Seller credits. On an FHA loan, the seller can pay up to 6% of the sales price toward your closing costs and prepaid items. You cannot receive unused seller credit as cash.
FHA Mortgage Insurance
Every FHA loan carries mortgage insurance, and it comes in two parts:
- An upfront premium, which is usually added to your loan amount instead of paid in cash.
- An annual premium, paid as part of your monthly payment.
How long the monthly premium lasts depends on your down payment. With less than 10% down, it lasts for the life of the loan. With 10% or more down, it lasts 11 years. Many FHA borrowers later refinance into a conventional loan once they have enough equity, which removes FHA mortgage insurance.
Credit Problems in Your Past
FHA can work for buyers who have had serious credit problems, after a waiting period:
- Chapter 7 bankruptcy: generally two years after the discharge date.
- Chapter 13 bankruptcy: possibly after 12 months of on-time plan payments, with court permission.
- Foreclosure: generally three years after it was completed.
Your credit since then matters as much as the waiting period. I review your full history before you start shopping so there are no surprises.
FHA vs. Conventional vs. VA
| Feature | FHA | Conventional | VA |
|---|---|---|---|
| Minimum credit score I offer | 580 | 620 | Set by lender |
| Mortgage insurance | Upfront and monthly; often for the life of the loan | With less than 20% down; can be removed | None monthly; a funding fee may apply |
| Who can use it | Any qualified buyer | Any qualified buyer | Eligible Veterans, service members, and surviving spouses |
| Second homes and rentals | No | Yes | No |
If you are an eligible Veteran, compare a VA loan first. If your credit is strong, a conventional loan may cost less over time because its mortgage insurance can come off. I run the numbers on each option you qualify for.
Refinancing an FHA Loan Later
If you already have an FHA loan, an FHA streamline refinance can lower your rate with less paperwork than a standard refinance. You can also refinance into a conventional loan to remove FHA mortgage insurance once you have enough equity.
Frequently Asked Questions
What credit score do I need for an FHA loan?
The minimum credit score for the FHA loans I offer is 580, with at least 3.5% down. Your score also affects your rate, so it is worth checking where you stand before you apply.
How long does FHA mortgage insurance last?
It depends on your down payment. With less than 10% down, monthly mortgage insurance lasts for the life of the loan. With 10% or more down, it lasts 11 years. Many buyers later refinance into a conventional loan to remove it.
Can I get an FHA loan after a bankruptcy or foreclosure?
Often, yes, after a waiting period. FHA generally requires a 2-year waiting period after a Chapter 7 bankruptcy discharge and a 3-year waiting period after a foreclosure. With a Chapter 13 bankruptcy, you may qualify after 12 months of on-time plan payments with court approval.
Can family help with my down payment on an FHA loan?
Yes. FHA allows gift funds from family members and certain other approved sources for the down payment and closing costs. The gift has to be documented with a gift letter and a record of the transfer.
See Whether an FHA Loan Fits You
Call 219-695-0369 or text me at 219-758-8072. You can also send me a message, get pre-qualified online, or schedule a consultation.
This is not a commitment to lend. Approval depends on credit, income, assets, property, and program guidelines, which can change.
