What is an FHA loan?
FHA loans are a good option when you’re buying a home, refinancing an existing FHA loan, or need cash from your home’s equity. FHA loans have competitive interest rates, flexible credit terms, and require low minimum down payments. They are backed by the Federal Housing Administration (FHA) and offered by private lenders like Freedom Mortgage! We can empower you on your homeownership journey with an FHA loan whether you’re buying or refinancing.
*Freedom Mortgage is proud to be a top FHA lender in the United States according to Inside Mortgage Finance, Jan-Jun 2022
FHA Home Purchase
- All qualified homebuyers are eligible
- Competitive interest rates
- Low minimum down payments
- Minimum credit score often 550
- Mortgage insurance premiums required
FHA Streamline Refinance
- Competitive interest rates
- Less paperwork and faster closings
- Easy credit score qualification
- Mortgage insurance premiums required
- Only existing FHA loans are eligible
FHA Cash Out Refinance
- All qualified homeowners are eligible
- Maximum loan-to-value ratio often 80%
- Minimum credit score often 550
- Mortgage insurance premiums required
Estimate your monthly FHA payment
Our FHA loan calculator estimates how much you might pay each month for principal and interest, taxes and insurance, and mortgage insurance premiums (MIP). Change the default values to personalize your estimate!
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Ask us what FHA loan rate we can offer you
The FHA rate we may be able to offer is personal to you. Your interest rate is affected by the type of loan you want, your credit score, your income and finances, as well as the current mortgage market environment. Freedom Mortgage may be able to offer you a rate that is lower - or higher - than the rate you see advertised by other lenders. Ask us today what FHA rate we can offer you.
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Learn more about FHA loans
Our FHA loan education articles answer your questions about how to buy a home or refinance a home with an FHA loan.
FHA loans for first-time homebuyers
Mortgages backed by the FHA can help you purchase a home
How much money do you need to buy a house?
Decide whether can afford to buy a home
First-time homebuyer tax credits, programs, and grants
Learn about financial assistance when buying a home
How long does it take to buy a house?
Typical time needed for the homebuying process
FHA loan FAQs
FHA loans are mortgages insured by the Federal Housing Administration (FHA) and offered by private lenders like Freedom Mortgage. These loans make buying or refinancing a home easier when you have a moderate income, less than perfect credit, or less money for a down payment. Because the FHA protects lenders against the risk of borrowers defaulting on their mortgages, lenders can offer favorable terms to customers who might not otherwise be approved for a home loan.
You apply for an FHA loan just like you would any other type of mortgage. The FHA isn’t lending you the money for your new home. They are just insuring the loan that your lender provides. However, you do pay the FHA for backing your loan with the upfront mortgage insurance premium (UFMIP) and the monthly insurance premium (MIP).
Yes, FHA homeowners have options for refinancing their mortgages. You can refinance your FHA loan using the FHA streamline refinance program. This program lets you lower your interest rate with less paperwork and a faster closing. You can also refinance an FHA loan into a conventional loan. This choice can help you lower your interest rate or stop paying the mortgage insurance premiums that come with FHA loans.
FHA loans can make buying or refinancing a home more affordable with lower down payments and more flexible credit, income, and financial requirements compared to conventional loans. Conventional loans often have more strict requirements but can offer competitive interest rates and terms as well as less expensive mortgage insurance costs. Learn more about FHA vs conventional loans.
Some of the benefits of choosing an FHA loan include:
- Competitive interest rates. FHA loans have rates that are competitive with other types of loans because they’re backed by the federal government. This makes FHA loans less risky for lenders than other types of loans.
- Lower down payment. If a sizeable down payment is your biggest barrier to homeownership, FHA loans only require a minimum down payment of 3.5% of the purchase price of the home. Other loan types like conventional loans often require a 5% minimum down payment.
- Low credit score requirement. Credit score requirements for FHA loans are often lower. At Freedom Mortgage, if you want to buy a home with an FHA loan, we can typically accept a minimum credit score as low as 550.
- More flexible qualification requirements. The qualifications for applying for an FHA loan are more flexible than other loans. You need to be a U.S. citizen, be able to make at least a 3.5% down payment, and provide financial documentation like proof of income. Read more about FHA loan requirements.
- No minimum income. FHA loans do not have any minimum income requirements. However, you will need to provide documentation demonstrating a steady income that can support your monthly mortgage payments.
Sometimes an FHA loan may not be your best option. Here are some potential disadvantages of FHA loans:
- Mortgage insurance premiums. FHA loans come with an upfront mortgage insurance premium (UFMIP) and a monthly mortgage insurance premium (MIP). Both are types of mortgage insurance. Conventional loans will not require mortgage insurance if you make a down payment over 20% of the home’s purchase price.
- Loan limits. FHA loans are backed by the Federal Housing Administration, which sets requirements on how big your loan can be because it makes the loan less risky for lenders. The loan limit varies across the country based on the median home price and federal law requires that the limit be above the median home price in each county. Learn more about FHA loan limits in your area.
- Primary residence only. An FHA loan can only be used to finance your primary residence, the home you intend to live in. FHA loans cannot be used for second homes, vacation homes, and investment properties.
- One loan at a time. In most circumstances, you cannot have more than one FHA loan at the same time.
- Minimum property requirements. The Federal Housing Administration requires that homes backed by FHA loans must be safe, sound, and secure. If you get an FHA loan, you will need an appraisal to prove the home meets the FHA’s property requirements.
There is a required minimum FHA loan down payment of 3.5% of the purchase price of the home. This is lower than the required down payment for conventional loans, which is often 5%. Keep in mind that the size of your down payment can affect how much you pay in interest over the life of the loan. The larger your down payment, the less money you’ll pay in interest.
Yes, there are FHA closing costs. They can include the one-time upfront mortgage insurance premium (UFMIP) as well as discount points, title and appraisal fees, property taxes and homeowners insurance premiums, and other fees.
The upfront mortgage insurance premium (UFMIP) is a fee included in your FHA loan closing costs. It is equal to 1.75% of the purchase price of the house, which can be paid at closing or financed into the loan amount. The Federal Housing Administration requires you to pay the UFMIP fee when you get an FHA loan.
A mortgage insurance premium (MIP) is a type of FHA mortgage insurance. It is an annual premium ranging from of 0.45% to 1.05% of the loan amount. Borrowers who make a smaller down payment on a 30-year loan will often pay 0.85%.
The FHA monthly insurance premium (MIP) often must be paid for the life of the loan. Some homeowners with FHA loans choose to refinance their FHA loan into a conventional loan so they no longer have to pay this fee.
Yes, FHA homeowners can qualify to borrow cash from the value of their home’s equity with an FHA cash out refinance. You will need a substantial amount of equity and you will need to meet your lender’s credit, income, and financial requirements to get your refinance approved.
Most lenders will allow you to pay off your FHA loan early. When you are thinking about paying off your FHA mortgage sooner than required, check to see if there are any prepayment penalties. At Freedom Mortgage, we do not charge prepayment penalties on our FHA loans.
To qualify for an FHA loan, you will need to be a U.S. citizen, have a steady income and established credit, and meet other requirements of the program and your lender. These include demonstrating you can afford the monthly mortgage payments. Read more about FHA loan requirements.
At Freedom Mortgage, we can often accept a minimum credit score for FHA loans as low as 550 to buy a home and a credit score as low as 550 to get an FHA cash out refinance. We can offer an easy credit qualification for FHA streamline refinances. Learn more about getting an FHA loan with bad credit.
There are no minimum income requirements for FHA loans. However, you will be required to prove you have a steady income and can afford your monthly mortgage payments when you apply for an FHA loan.
FHA loans have loan limits which vary by the county in which the home is located. The FHA assesses the loan limits each year to ensure the limits reflect median home prices within each county.
FHA loans can be used to buy or refinance detached and semi-detached houses, multiplexes up to four units, townhouses, and condominiums. In most cases, the property must be your primary residence – that is the place where you live most of the time.
FHA loans aren’t limited to first-time homebuyers. If you are buying your second home, you can use an FHA loan to purchase it, even if you used an FHA loan to buy your first home.
In general, you can only have one FHA loan at a time. In most cases you will need to live in the house you finance with an FHA loan too.
HUD typically requires you to live in a house as your primary residence for one year when you purchase it using an FHA loan. Afterward, you may be able to move out of the home and use it as an investment or rental property. Keep in mind that in most cases, you are limited to financing one home at a time with an FHA loan. Learn more about FHA loans for rental properties.
There are minimum FHA property requirements that must be met in order to secure an FHA loan. This includes an appraisal that ensures the home is safe to live in and meets the FHA’s property acceptability criteria.