FHA loans have long been the go-to mortgage for buyers who can't scrape together a 20% down payment.
Backed by the Federal Housing Administration, they let you put down as little as 3.5% — and sometimes 10% — with credit scores that would get you laughed out of a conventional lender's office.
In a market where the median home price is still hovering near record highs, that's not a small thing.
But "easier" doesn't mean "automatic." The rules are specific, and tripping over one of them can sink your application or cost you thousands in fees you didn't plan for.
Here's what you actually need to know before you start shopping. **The credit score math matters more than you think.** A 580 score gets you the 3.5% down payment option.
Drop to 500–579, and you're still eligible — but now you'll need 10% down.
Lenders can also layer their own minimums on top, so a 580 score won't help you if the bank you're working with wants 620. **Your debt-to-income ratio is the real gatekeeper.** Most FHA borrowers need a DTI under 43%, though some lenders stretch to 50% with compensating factors like cash reserves or a long employment history.
That ratio includes your new mortgage payment plus car loans, student debt, minimum credit card payments, and anything else showing up on your credit report.
If you're already stretched thin, paying down a card balance before applying can do more for you than shopping around. **The mortgage insurance never goes away on its own.** This is the part that surprises people.
FHA loans require both an upfront premium — 1.75% of the loan amount, usually rolled into the loan — and an annual premium paid monthly.
If you put down less than 10%, that annual premium typically sticks around for the life of the loan.
On a $350,000 mortgage, that's real money every month, and unlike conventional PMI, it won't vanish once you hit 20% equity. **Property standards are strict.** FHA appraisals aren't just about value.
Peeling paint, a broken handrail, or a roof on its last legs can kill the deal.
Sellers sometimes balk at FHA offers for this reason, which can put you at a disadvantage in a bidding war. **You'll need documentation — a lot of it.** Two years of tax returns, recent pay stubs, bank statements, and a paper trail for any large deposits.
Gift funds are allowed, but they need a letter and a paper trail too.
First-time buyers with steady income, modest savings, and a credit score in the low 600s who are willing to accept a higher monthly payment in exchange for getting in the door sooner.
It's a trade-off, not a free lunch. **The bottom line:** An FHA loan can be the difference between renting for another three years and owning a home now — but the mortgage insurance and stricter property rules mean you should run the full monthly cost before falling in love with a listing.
Compare it against a conventional loan with a slightly higher rate.
Final Thoughts
Sometimes the "harder" loan is actually the cheaper one.