📌 Key Takeaway: FHA loans require just 3.5% down with a 580+ credit score, but come with upfront and ongoing mortgage insurance premiums that stay for the life of most loans — the average 30-year FHA rate is 6.87% as of September 2026.
FHA Loan Basics
| Feature | FHA Requirement |
|---|---|
| Minimum down payment | 3.5% (580+ score) or 10% (500-579 score) |
| Upfront mortgage insurance | 1.75% of loan amount |
| Annual mortgage insurance | 0.15%-0.75% of loan amount, paid monthly |
| Loan limits | Vary by county, set annually by HUD |
FHA Mortgage Insurance: The Trade-Off
FHA's low down payment comes at the cost of mortgage insurance that, unlike conventional PMI, typically lasts for the life of the loan unless you refinance out of FHA entirely once you have enough equity.
Who FHA Loans Work Best For
Buyers with lower credit scores, limited savings for a large down payment, or higher debt-to-income ratios than conventional loans allow are often better served by FHA than trying to qualify conventional.
FHA vs. Conventional: Quick Comparison
- FHA is easier to qualify for with lower credit and higher DTI.
- Conventional avoids permanent mortgage insurance once you reach 20% equity.
- FHA mortgage insurance is often cheaper than conventional PMI for lower-credit borrowers, despite lasting longer.
This page is for educational purposes and isn't personalized financial or tax advice. Figures, rates, and program details change frequently — confirm current terms directly with lenders, tax professionals, or the IRS before acting.