One of two types of alternatives to a conventional loan (the other is a Veterans Affairs (VA) loan), FHA loans are insured by the Federal Housing Administration. If the homebuyer can't pay the loan, the government pays the lender for any losses. Because of the government's insurance, an FHA loan requires only a 3.5% down payment. Each mortgage lender, bank, or broker will offer different rates, terms, and fees for FHA loans, so it's best to shop around to find the best loan for you. To pay for FHA mortgage insurance, the buyer is charged an upfront mortgage insurance premium (can also be financed into the monthly mortgage payments), along with a monthly mortgage insurance premium.


  • Credit Score: 620 minimum
  • Down Payment: Minimum 3.5% of the home's sale price
  • Fee: 2.25% of the home's sale price
  • Mortgage Insurance: Upfront premium at closing & ongoing monthly payments


  • Lower credit score requirements
  • Smaller down payment
  • Greater flexibility for homebuyers with recent bankruptcies
  • No pre-payment penalty for paying off a loan early
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