If you've been priced out of a conventional mortgage, the Federal Housing Administration's loan program deserves a fresh look.
The FHA backs loans with down payments as low as 3.5 percent, and it's more forgiving than most people realize about credit scores and past financial stumbles.
Here's what actually matters if you're hoping to buy this year.
The credit score bar is lower than you might think.
You can qualify with a FICO score of 580 or higher and put just 3.5 percent down.
Scores between 500 and 579 can still work, but you'll need 10 percent down instead.
Compare that to conventional loans, which often want a 620 score minimum and can demand 5 to 20 percent down.
Debt-to-income ratios are where many buyers trip up.
Most lenders want your total monthly debts, including the new mortgage, to stay under 43 percent of your gross income.
Some automated approvals stretch to 50 percent, but that's not a promise.
If you're carrying big car payments or credit card balances, paying those down before you apply can matter more than saving extra cash.
FHA loans also allow gift funds for the entire down payment.
That means a family member can hand you the 3.5 percent, as long as there's a paper trail.
You'll also need a steady employment history, typically two years, and the home has to be your primary residence.
No investment properties under this program.
The mortgage insurance piece is the catch nobody mentions upfront.
FHA loans require two types of mortgage insurance premiums: an upfront fee of 1.75 percent of the loan amount, which usually gets rolled into the loan, and an annual premium paid monthly.
On a $300,000 loan, that monthly premium could run roughly $200 or more depending on your terms.
If you put down less than 10 percent, that annual mortgage insurance typically lasts the life of the loan.
You'd need to refinance into a conventional loan to drop it.
Put down at least 10 percent, and it falls off after 11 years.
That's why some buyers use FHA to get in the door, then refinance once they've built equity and their credit improves.
Loan limits adjust every year, and they vary by county.
In high-cost metros, FHA can back loans well above $500,000.
In most of the country, the ceiling sits closer to the mid-$400,000s.
Check the FHA's official loan limit lookup for your specific county before you start house hunting, because a limit that's too low kills the deal fast.
One more thing: sellers can contribute up to 6 percent toward your closing costs.
That's generous compared to many conventional loans.
Closing costs on an FHA loan often land between 2 and 5 percent of the purchase price, so negotiating seller credits can save you thousands at the table.
FHA loans aren't the "last resort" some agents make them out to be.
They're a legitimate path for first-time buyers, people rebuilding credit, and anyone who doesn't have a wealthy relative fronting 20 percent.
Just run the numbers on that mortgage insurance before you commit, because it changes the real monthly cost.
Final Thoughts
Shop at least three lenders, compare the full picture, and don't let anyone rush you into a loan that only looks cheap on the surface.