If you're house hunting with an FHA loan, you already know the drill: the government backs your mortgage, so the government gets a say in what you're allowed to buy.
What surprises a lot of buyers is how picky those rules can be, especially when they're competing against cash offers and conventional buyers in a tight market.
FHA loans remain one of the most forgiving paths to homeownership.
They typically require just 3.5 percent down if your credit score sits at 580 or higher, and the program is designed for buyers who've been told they don't qualify elsewhere.
But the fine print is where first-time buyers get burned.
The biggest sticking point is the property itself.
Before an FHA loan closes, the home has to pass an appraisal that inspects for safety and livability, not just value.
Peeling paint, a broken railing, a missing handrail, or a roof with visible wear can all trigger repair demands.
Sellers sometimes refuse to deal with it and pick a conventional buyer instead.
Upfront, you'll pay 1.75 percent of the loan amount at closing.
After that, annual premiums run between roughly 0.15 percent and 0.75 percent of the loan balance depending on your down payment and loan term.
On a $300,000 loan, that's real money every month.
For many borrowers, that premium stays for the life of the loan unless you refinance out of it.
FHA generally wants your total monthly debts, including the new mortgage, under 43 percent of your gross income.
Lenders can stretch higher with compensating factors like cash reserves or a strong credit history, but don't assume it.
Self-employed buyers should brace for extra paperwork.
Two years of tax returns, profit-and-loss statements, and a paper trail for every deposit are standard.
Gig income counts, but only if it's documented and consistent.
Expect 2 to 5 percent of the purchase price on top of your down payment, covering appraisal, title, origination, and other fees.
FHA allows sellers to contribute up to 6 percent toward these costs, which gives buyers a negotiating tool most people never use.
One often-overlooked upside: FHA loans are assumable.
If rates climb, a buyer can take over your mortgage at your original rate, which can make your home more attractive down the road.
The practical takeaway is to get your documentation organized before you tour a single house.
A lender pre-approval is not a guarantee, and the property itself has to clear its own hurdles.
Knowing the rules early keeps you from losing your dream home over a loose handrail.
Most buyers focus on the down payment and ignore the property condition rules until it's too late.
Final Thoughts
Spend an hour with a lender who actually closes FHA loans before you fall in love with a house you can't finance.