What is an FHA Loan?

As you begin shopping for your new home, you may hear about FHA mortgages as an alternative option to conventional loans and wonder how it's different. FHA loans are home loans that are backed by the United States Federal Housing Administration (FHA) that are designed to help low-to-moderate income people and people without ample savings become homeowners. The down payment requirements are lower than with many conventional mortgages, and you can typically qualify with a lower credit score that most conventional lenders would accept.

Here are some frequently asked questions about FHA loans so you can get a sense of whether this type of home loan is right for you.

Do I Need to be a First-Time Home-Buyer to Get an FHA Loan?

No, you do not need to a be first-time home buyer. You simply need to be purchasing a home you will live in as a primary residence.

Do I Need to be Lower-Income to Qualify?

No, you do not need to be lower-income to qualify for an FHA loan. People of all income levels are eligible to apply for an FHA loan. You simply need to meet the down payment and credit score requirements, which are less stringent than most conventional loans.

What Sort of Down Payment is Required for an FHA Loan?

The typical requirement for a down payment for an FHA loan is 3.5% to 10% with credit score likely determining the amount.1 By contrast, most conventional lenders will require a 10% or 20% down payment.

Can I Use Down Payment Assistance and/or Gifts to Cover the Down Payment?

Yes, you can use down payment assistance and gifts to cover some or all of the down payment. By contrast, conventional loans may require that you use your own money for at least 10% of the down payment.