If you've been priced out of buying a home, one loan program keeps showing up in conversations at kitchen tables across the country: the FHA loan.
It's backed by the Federal Housing Administration and designed for buyers who don't have perfect credit or a fat down payment sitting in savings.
You typically need a credit score of at least 580 to put down just 3.5 percent.
Scores between 500 and 579 can still qualify, but lenders will usually ask for 10 percent down.
That's a far cry from the 20 percent many people assume is mandatory.
The catch most buyers miss is the mortgage insurance.
FHA loans require two types: an upfront premium of 1.75 percent of the loan amount, rolled into what you borrow, plus an annual premium that gets split across your monthly payments.
On a $300,000 loan, that upfront charge alone adds $5,250 to your balance before you make a single payment.
There's also a debt-to-income rule that trips people up.
Lenders generally want your total monthly debts, including the new house payment, to stay under 43 percent of your gross income.
Some automated approvals stretch to 50 percent, but that's not something to count on.
The home has to pass an appraisal and meet basic safety and condition standards.
Peeling paint, a broken furnace, or a roof on its last legs can stall or kill a deal.
Sellers sometimes cover repairs, but not always, so budget for surprises.
On the plus side, FHA loans are assumable.
If you sell later, a qualified buyer can take over your loan and potentially inherit your interest rate.
In a market where rates have bounced between the mid-6s and 7 percent, that's a real selling point worth mentioning to your agent.
Many states run assistance programs that pair with FHA loans, covering part or all of that 3.5 percent.
These programs often get overlooked because they aren't advertised well, so it's worth a call to your state housing finance agency.
One thing to watch: FHA loan limits vary by county.
In expensive metros, the ceiling for a single-family home sits above $1.1 million, while rural areas cap much lower.
Check the limit for your specific county before you fall in love with a listing.
Expect 2 to 6 percent of the purchase price, covering appraisal, title, and lender fees.
Sellers can contribute toward these, and in a slower market, many will.
The honest takeaway is that an FHA loan isn't free money and it isn't the cheapest option if you have strong credit and a big down payment.
Conventional loans often win in that scenario.
But for first-time buyers with thin credit files and modest savings, it remains one of the most realistic paths to a front door.
Talk to at least two lenders before you commit.
Final Thoughts
Rates and fees swing widely between them, and a half-point difference on a 30-year loan can cost you tens of thousands over the life of the loan.