FHA Loans

What Is an FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development (HUD). The FHA doesn't lend you the money. Instead, it insures the loan, which protects the lender if a borrower stops paying. That protection lets lenders approve buyers who might not qualify for a conventional loan.

Key features (as of 2026, subject to change):

• Down payment as low as 3.5% with a credit score of 580 or higher.
• Credit scores down to 500 may be allowed with 10% down.
• Gift funds welcome. Your entire down payment can be a gift from a family member or approved source.
• Mortgage insurance. You pay an upfront premium of 1.75% of the loan (usually rolled into the loan) plus an annual premium split into your monthly payment.
• Primary homes only. You must live in the home. One- to four-unit properties are allowed.
• Loan limits. Maximum loan amounts are set by county.

Documents Needed for FHA Loans

Having your paperwork ready is the easiest way to keep your loan moving. Plan to gather:

• Government-issued photo ID and Social Security number
• Pay stubs covering the most recent 30 days
• W-2s for the past two years (or 1099s if you're paid that way)
• Federal tax returns for the past two years if you're self-employed or have other income
• Bank statements for the last two months, all pages
• Statements for retirement or investment accounts
• A gift letter and proof of transfer if someone is helping with your down payment
• Explanations for credit issues, job gaps or large deposits
• Divorce decree, bankruptcy papers or child support orders, if they apply

Don't worry if something is missing. I'll give you a personalized list and help you track down anything unusual.

FHA Versus Conventional Loans

The biggest differences come down to credit, down payment and mortgage insurance. FHA loans are more forgiving on credit scores and debt-to-income ratios, and the down payment can be fully gifted. Conventional loans usually cost less for borrowers with strong credit, and their mortgage insurance can be removed later.

FHA mortgage insurance is priced the same no matter your credit score, while conventional PMI gets more expensive as scores drop. That's why buyers with scores in the low 600s often find FHA cheaper month to month, while buyers with scores above 700 often save with conventional.

FHA appraisals also check that the home is safe and livable. Peeling paint, a broken roof or missing handrails may need to be fixed before closing. Many buyers start with FHA and refinance into a conventional loan once they've built equity.

What Can I Afford?

Affordability is about more than what a lender approves. FHA guidelines typically look at two ratios. Your housing payment (principal, interest, taxes, insurance and mortgage insurance) is usually compared to about 31% of your gross monthly income, and your total monthly debts to about 43%. With strong compensating factors like savings or excellent payment history, approvals can go higher (as of 2026, subject to change).

Here's a simple example. If your household earns $6,000 a month before taxes, 31% is about $1,860 for your housing payment and 43% is about $2,580 for all debts combined, including car loans and credit cards.

Just as important is what feels comfortable to you. I always want you to leave room in your budget for savings, repairs and life's surprises. Try our mortgage calculators, then let's talk through your real numbers.

Bankruptcy and FHA Loans

A past bankruptcy doesn't close the door on homeownership. FHA is one of the most forgiving programs when it comes to rebuilding after financial hardship.

• Chapter 7: You may qualify two years after your discharge date, as long as you've re-established good credit.
• Chapter 13: You may qualify after 12 months of on-time plan payments, with approval from the bankruptcy trustee.
• Extenuating circumstances: Shorter waiting periods may be possible if the bankruptcy was caused by events outside your control, like a serious illness or death of a wage earner.

Waiting periods are as of 2026, subject to change. The best thing you can do after bankruptcy is pay every bill on time and keep credit card balances low. If you're in this situation, reach out early. We can map out a timeline and steps to get you ready.