The Federal Housing Administration has been quietly tinkering with its mortgage rules, and if you're shopping for a home with a smaller down payment, the details matter more than the headlines suggest.
The pitch sounds simple: 3.5 percent down, more forgiving credit standards, and a path to a house that conventional loans often won't touch.
But the fine print hasn't gotten any friendlier.
An FHA loan typically requires a 580 credit score for the 3.5 percent down option, or 500 to 579 if you can put 10 percent down.
Sounds generous until you price out the mortgage insurance.
Every FHA borrower pays an upfront premium of 1.75 percent of the loan amount, plus an annual premium that now runs between roughly 0.15 percent and 0.75 percent depending on your down payment and loan term.
If you put down less than 10 percent, that annual mortgage insurance premium generally stays for the life of the loan unless you refinance into a conventional product.
On a $350,000 home, that can quietly add hundreds of dollars a month for years.
Conventional loans let you drop private mortgage insurance once you build enough equity.
There's also a debt-to-income ceiling that trips up plenty of buyers.
FHA generally likes to see your total monthly debts, including the new mortgage, stay at or below 43 percent of your gross income, though lenders can stretch to around 50 percent with compensating factors like cash reserves or a long employment history.
Student loans get counted at 1 percent of the balance even if you're on an income-driven plan paying nothing.
That single rule has disqualified more buyers than most people realize.
The FHA itself, through insurance premiums that flow back to the agency, and lenders who originate the loans and sell them into a government-backed market with minimal risk.
The requirements worth checking before you fall in love with a listing: a steady two-year work history, a valid Social Security number and lawful residency status, the property must be your primary residence, and it has to pass an FHA appraisal that's stricter than a conventional one.
Chipped paint, a shaky deck railing, or a missing handrail can kill a deal.
Sellers sometimes reject FHA offers outright for that reason, which matters in a competitive market.
If your credit is thin or your savings are small, an FHA loan can still be the difference between renting forever and owning something.
But run the numbers on total monthly cost, not just the down payment, and compare it side by side with a conventional quote before you commit.
A mortgage broker who only pushes FHA products isn't doing you a favor.
The FHA program isn't a trap, but it's not the free lunch it's marketed as either.
It's a government-backed product with real costs baked in, and the people selling it rarely lead with those.
Final Thoughts
Know what you're signing before you sign it.