Last updated on July 29, 2026

FHA Loans

An FHA loan is a mortgage insured by the Federal Housing Administration through approved lenders, featuring lower down payment requirements, flexible credit standards, and mandatory mortgage insurance premiums that protect the lender if the borrower defaults.

Exam context

Match FHA to HUD mortgage insurance, not Fannie Mae secondary market purchase. VA loans serve eligible veterans without FHA MIP. Conventional loans may avoid mortgage insurance above 20% down.

Insurance and eligibility

FHA does not lend directly; HUD-approved lenders underwrite to FHA handbooks. Borrowers pay upfront and annual mortgage insurance premiums. Minimum down payments can be as low as 3.5% with qualifying credit. Property must meet FHA minimum property standards and be owner-occupied in most programs.

Underwriting flexibility

Higher debt-to-income ratios and lower credit scores may qualify compared with strict conventional programs. FHA loans are assumable subject to approval, which can help sellers in rising rate environments. Loan limits vary by county and property type.

Examples

  • First-time buyer

    A buyer with a 640 credit score puts 3.5% down on a primary residence using FHA insurance, paying upfront MIP at closing and monthly premiums thereafter.

  • Assumption

    A buyer assumes an existing FHA loan at a below-market rate after credit review, avoiding new origination when the seller releases liability per lender rules.

Keep studying

Practice fha loans questionsEnroll in pre-licensing

Related terms

  • Conventional loanNon-government-insured alternative with different down payment rules.
  • Fannie MaeGSE buyer of conforming conventional loans, not FHA insurer.

Related resources

Sources

Sources with the date each row was checked
FactAuthorityURLVerified
HUD: FHA single family housing programsU.S. Department of Housing and Urban Developmenthttps://www.hud.gov/federal_housing_administration

Facts on this page were last verified . Next scheduled review .