How do FHA Loans Work?

FHA home loans are issued by approved lenders and insured by the Federal Housing Administration, a part of the U.S. Department of Housing and Urban Development (HUD). This insurance reduces risk for lenders and allows for lower credit requirements and smaller down payments.

FHA loan programs are especially popular with first-time homebuyers or borrowers who may not qualify for conventional financing.

Who Are FHA Loans Best For?

• First-time homebuyers
• Buyers with limited down payment savings
• Borrowers with lower credit scores

Key Features and Benefits of FHA Loans:

• Down payment as low as 3.5%
• 100% gift funds may be used for down payment
• Sellers may contribute up to 6% of the lesser of the purchase or appraised value toward eligible buyer closing costs and prepaid expenses
• Flexible credit qualifying – possibility to qualify with a credit score as low as 600
• Fixed or adjustable-rate options available
• May finance single-family homes, condominiums, 2-to-4 unit multifamily homes, and certain manufactured homes

FHA Loan Limits in 2026

• 1-unit: $541,287
• 2-unit: $693,050
• 3-unit: $837,700
• 4-unit: $1,041,125

Loan limits vary by geographic location and are set annually by the U.S. Department of Housing and Urban Development (HUD). These figures represent the 2026 FHA baseline (“floor”) loan limits. Higher limits—up to $1,249,125 for single-family homes—apply in designated high-cost areas.

How is an FHA Mortgage Different Than a Conventional Mortgage?

While FHA and Conventional loans both have limits set by federal agencies, conventional mortgages are not government-insured. Because of this, FHA loans generally offer more flexibility with credit history and qualifying factors compared to conventional loans, particularly for borrowers with lower credit scores. FHA loans also require mortgage insurance, regardless of your down payment amount.

Find Out if You Qualify for an FHA Loan

Discover if you would benefit from an FHA mortgage by connecting with a Loan Originator

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