FHA Loans for First-Time Homebuyers

Mortgages Backed by the FHA Can Help You Purchase a Home

Federal Housing Administration (FHA) loans are a popular mortgage choice for first-time homebuyers. That's because FHA loans have lower down payments and more flexible credit, income, and asset requirements than Conventional loans.

Conventional loans often have higher credit score requirements compared to FHA loans. You usually need to buy private mortgage insurance if you make a down payment of less than 20%. Lenders may want you to have a lower debt-to-income ratio (DTI) when you apply for a Conventional loan. And Conventional loans often have higher interest rates than FHA loans for homebuyers with less than perfect credit.

FHA Loan Requirements for First-Time Homebuyers

The following requirements can make FHA loans attractive to first-time homebuyers:

• Down payments as low as 3.5% of the purchase price. This is particularly useful to homebuyers who do not have the cash to make a large down payment.
• Lower minimum credit scores. At Freedom Mortgage, we may be able to help you buy a home with an FHA loan with a credit score as low as 550.
• Higher debt-to-income ratios. Lenders of Conventional mortgages generally don't want your debt-to-income ratio to be higher than 36%. With an FHA loan, you can sometimes have a DTI as high as 43%.
• Competitive interest rates. FHA loans can have rates competitive with Conventional loans. Be sure to look at the annual percentage rate (APR) when you are comparing mortgage offers. APR shows the total cost of a loan, including interest payments and any closing costs, fees, and mortgage insurance you might have to pay.

FHA loans have other requirements you'll want to understand before you choose one. For example, you will need to pay an upfront mortgage insurance premium as well as an annual premium. There are also limits on the amount of money you can borrow. Learn more about FHA loan requirements and their advantages and disadvantages.

To learn more about how much your monthly payment might be, check out our FHA loan mortgage calculator.

You aren't restricted to buying just your first home with an FHA loan. You can buy your next home as well. You can only use an FHA loan to buy a primary residence–that is the house where you intend to live–and in most cases you can only buy one house at a time. You can refinance your home with an FHA loan too, including with the FHA streamline refinance program.

Freedom Mortgage is a top FHA lender in the United States according to Inside Mortgage Finance, Jan.–Sep., 2024.

Last reviewed and updated April 2024 by Freedom Mortgage.