Mortgage Basics
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, a division of HUD. FHA loans are designed to help buyers with lower credit scores or smaller down payments access homeownership. They are one of the most tested loan types on the real estate licensing exam.
FHA Loan Requirements at a Glance
Minimum Down Payment
3.5% down with a credit score of 580 or higher. Borrowers with scores between 500–579 may qualify with 10% down. FHA allows higher debt-to-income ratios than conventional loans.
Mortgage Insurance Premium (MIP)
All FHA loans require an upfront MIP (1.75% of the loan amount) plus an annual MIP (0.55–1.05%). On most FHA loans with less than 10% down, MIP lasts the life of the loan — a significant long-term cost.
Loan Limits
FHA loan limits are set by county. The national floor is $498,257 in 2024 for a single-family home. High-cost areas have higher limits. Always lower than conventional conforming limits in most markets.
Property Standards
FHA appraisals are stricter — the property must meet HUD minimum property standards. Issues like peeling paint on pre-1978 homes or safety hazards must be repaired as conditions of the loan.
Real Estate Exam Key Points
FHA is insured by the federal government through HUD — not guaranteed like VA
Minimum 3.5% down with 580+ credit score; 10% down with 500–579
Upfront MIP: 1.75% of loan amount; annual MIP: 0.55–1.05%
MIP lasts the life of the loan for most FHA borrowers (unlike cancellable PMI)
FHA loan limits are set by county and updated annually by HUD
FHA appraisals apply stricter property condition standards than conventional
Administered by HUD — the Department of Housing and Urban Development
Practice Real Estate Finance Questions
Loan types account for a significant portion of real estate exam questions. Test your knowledge with state-specific practice questions.
Definition Page Pillars
Use this term page as a concept layer, then return to pillar pages for full workflow review.