A mortgage backed by the Federal Housing Administration (FHA) can be a great option for first-time homebuyers.
Because they're insured by the government, FHA loans are less risky for lenders. That means you can often qualify with a lower credit score and a smaller down payment.
But FHA loans can have higher rates and come with restrictions you won't find with other types of mortgages.
What is an FHA loan?
An FHA loan is a mortgage backed by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (HUD). Since they're less risky for lenders, FHA loans have lower credit scores and down payment requirements and higher debt-to-income ratios (DTIs) than conventional mortgages.
There are several FHA mortgage options — including loans with a fixed or variable rate and terms of up to 30 years. There are also specialty loans, like the FHA 203(k), which can pay for home renovations. If you refinance an FHA mortgage, you can take advantage of streamlined refinancing, which could save you a credit check or home appraisal.
How much can I borrow with an FHA loan?
In 2025, the loan limit for FHA loans rose to $524,225 for single-family homes, an increase of more than $25,000 from 2023. A loan limit "ceiling" of $1,209,750 exists for high-cost areas.
PNC Bank issues FHA loans and is one of our top lenders for first-time buyers. The Pittsburgh-based institution offers a grant of up to $5,000 that can go toward closing, down payments or other costs.
Another top lender, Rocket Mortgage, will consider FHA loan candidates with credit scores as low as 580.
PNC Bank
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, HELOCs, Community Loan and Medical Professional Loan
Terms
10 – 30 years
Credit needed
620
Minimum down payment
0% if moving forward with a USDA loan
Terms apply.
Read our PNC Bank mortgage review
Rocket Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages are available.
Types of loans
Conventional loans, FHA loans, VA loans, Jumbo loans, low-down-payment mortgages
Terms
10-, 15- and 30-year fixed-term conventional loans, 30-year VA and FHA loans, custom mortgages with fixed-rate terms from 8 to 29 years.
Credit needed
620 for conventional loans
Minimum down payment
0% for VA, 1% for RocketONE+, 3% for conventional, 3.5% for FHA, 10% to 15% for jumbo
Read our review of Rocket Mortgage
FHA loan requirements
FHA mortgages can only be used to buy a primary residence. The property can have up to four units, however, so long as one is for you.
| Loan limit | $524,225, up to $1,209,750 in certain high-cost areas. |
| Credit score | 580 with 3.5% down payment, 500 with 10% down. |
| Income requirements | None |
| Debt-to-income ratio | 43% |
The requirements set by the FHA are only a baseline and lenders will often set additional guidelines beyond those minimums. You may need a credit score of 620 to qualify at a specific bank, for example, even if the FHA accepts a lower credit score.
FHA loans also require a special appraisal, which must be completed by a HUD-approved home appraiser.
Mortgage insurance premiums
The mortgage insurance on an FHA loan also works differently than private mortgage insurance (PMI): You'll pay 1.75% of the loan balance up front and then an annual mortgage insurance premium (MIP) of 0.15% to 0.75%, usually for the life of the loan.
If you have a down payment of 10% or more, however, the MIP is dropped after 11 years.
While PMI is typically waived from a conventional loan after you have 20% equity in your home, MIP isn't waived when your loan-to-value (LTV) ratio hits a certain level. (When your LTV drops to 80%, however, you may be able to refinance into a conventional loan and stop paying for MIP.)
Pros and cons of FHA loan pros
- Smaller down payment
- No income requirements
- Lower credit score requirement
- Mortgage insurance not based on credit score
- Upfront mortgage insurance premium of 1.75%
- Monthly mortgage insurance payments are more difficult to waive
- Lower loan limits compared to conventional loans
- Can't be used for vacation homes or non-owner occupied rentals
- Requires a stricter appraisal
FHA loan FAQs
What is the downside of an FHA loan?
An FHA loan comes with an upfront payment of 1.75% of your loan, as well as monthly payments of up to 0.75%. The approval process is more involved, as well.
What is the minimum credit score for an FHA loan?
An FHA loan with a 3.5% down payment usually requires a credit score of 580. With a score of 500, you will likely need to put at least 10% down to get approved.
Do FHA loans have higher monthly payments?
Depending on the lender, an FHA loan might have a lower interest rate than a conventional mortgage. Mortgage insurance premiums and other costs could make an FHA loan more expensive in the long run, however.
What is the most you can borrow with an FHA loan?
The limit for FHA loans in 2024 is $524,225 for single-family homes in most of the U.S. The maximum loan is $1,209,750, but only certain high-cost areas in a few states are eligible.
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