Low down payment. Flexible credit. Government-backed security. Here's everything you need to know about FHA loans — and how to keep even more money at closing.
An FHA loan is a mortgage insured by the Federal Housing Administration — a division of the U.S. Department of Housing and Urban Development (HUD). FHA doesn't lend money directly; instead, it insures loans made by approved lenders, reducing the lender's risk and making homeownership accessible to borrowers who might not qualify for conventional financing.
FHA loans have been helping Americans buy homes since 1934. Today, they remain one of the most popular loan programs — especially for first-time buyers, buyers rebuilding credit, and anyone who wants to minimize their upfront cash outlay.
| Requirement | FHA Loan | Conventional |
|---|---|---|
| Minimum Down Payment | 3.5% (580+ credit) | 3–5% typical |
| Credit Score | 580 (3.5% down) or 500 (10% down) | 620+ typical |
| Debt-to-Income (DTI) | Up to 57% with compensating factors | Up to 50% typical |
| Mortgage Insurance | Upfront 1.75% + annual 0.55% | PMI until 20% equity, then removable |
| Loan Limits (2026) | $524,225–$1,209,750 by county | $766,550–$1,149,825 conforming |
| Property Standards | Must meet FHA Minimum Property Requirements | Standard appraisal |
| Occupancy | Primary residence only | Primary, second home, or investment |
FHA loan limits vary by county and are updated annually based on local home prices. Here are representative limits for ShopProp's licensed states:
King County: $1,209,750
Snohomish: $1,209,750
Pierce: $644,000
License: 9004
Santa Clara: $1,209,750
Los Angeles: $1,209,750
San Diego: $1,006,250
License: 01890638
Honolulu: $1,209,750
Maui: $1,209,750
License: RB-22506
Maricopa: $524,225
Pima: $524,225
License: O674161000
Denver: $816,500
Eagle (Vail): $1,209,750
License: EC100108325
Travis (Austin): $571,550
Harris (Houston): $524,225
License: 756082-B
Fairfax: $1,149,825
Richmond: $524,225
License: 0225239672
Oakland: $524,225
Kent (GR): $524,225
License: 6505433466
FHA loans require two types of mortgage insurance premium (MIP). This is the trade-off for flexible qualification — and understanding how it works helps you plan your true monthly cost.
1.75% of the loan amount, due at closing. Most borrowers roll this into the loan rather than paying it out of pocket. On a $400,000 loan, that's $7,000 added to your balance.
0.55% of the loan amount per year for most borrowers, paid monthly. On a $400,000 loan, that's about $183/month.
| Factor | FHA MIP | Conventional PMI |
|---|---|---|
| Upfront Cost | 1.75% of loan | None |
| Monthly Rate | 0.55%/year | 0.3–1.5%/year (credit-dependent) |
| Removal | Life of loan (<10% down) or 11 years | Automatic at 78% LTV |
| Best For | Lower credit scores (500–619) | Credit scores 720+ |
Your mortgage type is one savings lever. Your agent's fee structure is another — and it's the one most buyers overlook.
After the 2024 NAR settlement, buyers negotiate agent compensation separately. Traditional agents charge 2.5–3% of the purchase price. At ShopProp, representation is a flat $4,495 — regardless of price. The difference comes back to you as a rebate at closing.
| Home Price | Traditional 2.5% | ShopProp Flat Fee | Your Rebate |
|---|---|---|---|
| $350,000 | $8,750 | $4,495 | $4,255 |
| $450,000 | $11,250 | $4,495 | $6,755 |
| $600,000 | $15,000 | $4,495 | $10,505 |
| $800,000 | $20,000 | $4,495 | $15,505 |
| $1,000,000 | $25,000 | $4,495 | $20,505 |
Review credit score (580+ for 3.5% down), employment history (2 years), and DTI ratio. FHA is forgiving — bankruptcies cleared after 2 years, foreclosures after 3.
Shop at least 3 FHA-approved lenders. Rates and closing costs vary significantly. Pre-approval shows sellers you're serious and locks your rate window.
After the NAR settlement, you negotiate agent compensation separately. A managing broker-led firm like ShopProp provides full representation at a flat fee — with the difference returned as a rebate.
FHA requires the property to meet Minimum Property Requirements (MPR) — basic safety, soundness, and security standards. Your managing broker can identify potential MPR issues before you make an offer.
FHA appraisals are stricter than conventional — the appraiser checks both value and condition. Required repairs must be completed before closing. A construction-background managing broker is particularly valuable here.
At closing, your buyer rebate is applied as a credit or disbursed per your state's rules. Your managing broker reviews every document before you sign.
| Feature | FHA | Conventional | VA |
|---|---|---|---|
| Down Payment | 3.5% | 3–20% | 0% |
| Min. Credit Score | 580 (or 500 w/ 10%) | 620+ | 580+ typical |
| Mortgage Insurance | MIP (life of loan or 11yr) | PMI (removable at 20%) | None (funding fee instead) |
| Property Types | 1–4 unit primary | Primary, 2nd, investment | Primary residence |
| Seller Concessions | Up to 6% | 3–9% (varies by down) | Up to 4% |
| Best For | First-time, lower credit, low cash | Good credit, 20% down | Veterans, active military |
FHA transactions have more moving parts than conventional purchases — stricter appraisals, required repairs, MIP calculations, seller concession limits. Most agents handle these reactively. A managing broker handles them proactively.
At ShopProp, every FHA transaction is overseen by a managing broker with backgrounds in construction and finance. That means:
Same oversight whether it's a $350,000 starter home or a $1M property at the FHA limit. Same flat $4,495 fee.
Calculate your savings, connect with a managing broker, or explore your options with our AI assistant.
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