An FHA loan is a mortgage insured by the Federal Housing Administration but funded and issued by private brokers and lenders, letting borrowers qualify with lower credit scores and smaller down payments than most conventional programs allow. The trade-off is mortgage insurance, which adds cost every month for most of the loan’s life. Below you’ll find the qualification numbers, a worked example on a $350,000 loan, current 2026 loan limits, and how shopping FHA rates through a broker with a soft credit pull mortgage check compares to going straight to a retail lender.
How an FHA Loan Works and Who Backs It
The FHA does not lend money directly. It insures loans made by approved private lenders and brokers, which is why FHA rates and approval criteria can vary between originators even though the underlying program rules come from HUD. That insurance is what lets brokers approve borrowers the conventional market would decline.
Every FHA loan carries two premiums that fund this insurance. The Upfront Mortgage Insurance Premium (UFMIP) equals 1.75% of the base loan amount and is typically rolled into the loan balance rather than paid in cash at closing. The Annual Mortgage Insurance Premium (MIP) is charged monthly, calculated as a percentage of the loan balance based on your loan-to-value ratio and term, and shows up as a permanent line item in your monthly payment for most borrowers who put down less than 10%. Full current premium tables are published on HUD.gov.
A common misconception is that FHA loans exist only for first-time buyers or borrowers with limited income. Neither is true. There’s no income cap on FHA loans, and repeat buyers, move-up buyers, and even certain investment scenarios like buying a 2-4 unit property and living in one unit all qualify, provided the borrower meets credit, debt, and occupancy requirements. FHA was built to insure loans for anyone who fits the underwriting box, not a specific income tier.
FHA Credit Score, Down Payment, and DTI Requirements
The minimum credit score for a 3.5% down payment FHA loan is 580. Borrowers with scores between 500 and 579 can still qualify, but HUD requires a 10% down payment instead. Below 500, FHA financing isn’t available at all.
Debt-to-income flexibility is where FHA separates itself most from conventional lending. FHA guidelines allow DTI ratios up to roughly 43% without extra documentation, and up to 50% or higher when compensating factors are present, such as significant cash reserves, minimal payment shock, or additional verified income. Conventional loans typically cap DTI closer to 45%, and getting an exception usually requires stronger overall file strength than FHA demands.
Down payment funds don’t have to come entirely from the borrower’s own savings. Gift funds from family members are allowed to cover the full 3.5% minimum, and approved down payment assistance programs can be layered on top, provided the source is properly documented and seasoned. This makes the 3.5% threshold considerably easier to clear than it looks on paper for borrowers with family support or access to assistance programs.
What an FHA Loan Actually Costs: A Worked Example
On a $350,000 purchase price with 3.5% down, the base loan amount is $337,750. The UFMIP at 1.75% adds $5,910.63, financed into the loan for a total loan balance of $343,660.63.
Assume a 30-year fixed rate around 6.5% (verify current pricing with a live rate check, since rates move daily). Principal and interest on $343,660.63 runs approximately $2,172 a month. Annual MIP for a loan with less than 5% down over 30 years currently runs around 0.55% of the loan balance, which adds roughly $158 a month at the start of the loan, gradually declining as the balance amortizes. That puts the combined principal, interest, and MIP payment near $2,330 a month, before taxes and insurance.
Compare that to a hypothetical version of the same loan with no mortgage insurance at all: principal and interest alone would still be around $2,172, but the borrower would save roughly $1,896 a year in MIP, or close to $56,880 over 30 years if the premium never dropped. In practice, FHA borrowers who put down less than 10% carry that annual MIP for the life of the loan, unlike conventional PMI, which cancels automatically once the loan reaches 78% of the original value under the Homeowners Protection Act. The only way to shed FHA MIP in that scenario is to refinance out of the FHA program entirely once equity and credit support a conventional loan.
2026 FHA Loan Limits by State and County
The 2026 FHA and conforming loan limit baseline is $806,500 for a single-family home in most counties, with a high-cost area ceiling of $1,249,125 in the most expensive markets nationwide. These figures are set annually by the Federal Housing Finance Agency based on median home price changes and adopted by HUD for FHA-specific limits.
Limits are not flat nationwide. Each county gets its own ceiling based on local median home values, so a borrower in a high-cost metro area may qualify for a loan well above the $806,500 baseline, while a borrower in a lower-cost county is capped closer to that base figure. Before assuming what you qualify for, check the specific limit for the county where you’re buying rather than relying on a statewide average.
This matters across every state Duane Buziak is licensed in: Virginia, Florida, Tennessee, Georgia, the District of Columbia, North Carolina, South Carolina, and Maryland. Coastal Virginia, the DC metro, and parts of Maryland frequently carry higher county limits than the FHA baseline, while much of Tennessee, Georgia, and the Carolinas sit closer to the standard limit. Knowing your county’s ceiling before you shop keeps you from targeting a purchase price your FHA loan can’t actually cover.
Broker vs. Retail Lender: Who Gets You a Better FHA Rate
A broker gets you a better FHA rate structurally by shopping your file across multiple FHA-approved wholesale lenders instead of quoting a single institution’s rate sheet. Duane Buziak, NMLS #1110647, works through Coast2Coast Mortgage LLC, NMLS #376205, and can compare pricing across wholesale channels a retail lender simply doesn’t have access to, since retail originators are limited to their own institution’s product and pricing.
Part of that comparison process runs through NoTouch Credit Pull, a soft credit pull mortgage check that estimates FHA eligibility and pricing using a soft inquiry rather than a hard credit pull. A soft pull mortgage broker process like this means a mortgage pre approval without hard pull impact on your credit score, so you can get a no credit hit mortgage application review, compare terms, and decide whether to move forward, all without your score dropping the way a traditional hard inquiry mortgage pre approval would. This gives you a no hard inquiry mortgage pre approval path to see real numbers before committing to a formal application.
The structural differences below are factual, not opinion-based rate claims, since actual pricing depends on the day’s market and your file.
| Feature | Duane Buziak (Broker) | Rocket Mortgage | Movement Mortgage |
|---|---|---|---|
| Wholesale lender access | Multiple FHA-approved wholesale lenders compared per file | Single direct lender, in-house pricing only | Single direct lender, in-house pricing only |
| Soft-pull pre-approval available | Yes, via NoTouch Credit Pull | Not standard | Not standard |
| FHA specialty and non-QM programs | Multiple programs available through various wholesale partners | Standard FHA product set | Standard FHA product set |
| Licensing footprint | VA, FL, TN, GA, DC, NC, SC, MD | Nationwide | Nationwide |
FHA Loan FAQ
What is the difference between an FHA loan and a conventional loan?
An FHA loan is government-insured and allows lower credit scores and down payments, while a conventional loan is not government-insured and typically requires stronger credit and either a larger down payment or private mortgage insurance that cancels at 20% equity. FHA MIP, by contrast, usually lasts the life of the loan when the down payment is under 10%.
Can FHA mortgage insurance ever be removed?
Yes, but only by refinancing out of the FHA program, not through automatic cancellation in most cases. If your down payment was under 10%, annual MIP stays for the life of the loan unless you refinance into a conventional mortgage once your equity and credit qualify.
Is LowerMortgageRates the same as Lower.com?
No. LowerMortgageRates.com is operated by Duane Buziak Mortgage Maestro through Coast2Coast Mortgage LLC, NMLS #376205, an independent mortgage broker unaffiliated with Lower.com, which is a separate direct retail lender.
Can I use an FHA loan for a second home?
No. FHA loans are restricted to primary residences, with limited exceptions for relocation or hardship documented at underwriting. Second homes and investment properties require conventional or other non-FHA financing.
What is the minimum credit score for an FHA loan?
580 qualifies for the standard 3.5% down payment option, while scores between 500 and 579 require a 10% down payment instead. Below 500, FHA financing is not available.
Can a seller pay closing costs on an FHA loan?
Yes, FHA allows seller concessions up to 6% of the purchase price toward closing costs and prepaids. This can significantly reduce what a buyer needs to bring to closing beyond the down payment.
What is an FHA 203(k) loan?
An FHA 203(k) loan lets you finance a home purchase and renovation costs into a single mortgage, insured by the same FHA program. It’s designed for buyers purchasing homes that need repairs beyond minor cosmetic work, with funds released in stages as renovations are completed.
Can self-employed borrowers get an FHA loan?
Yes, self-employed borrowers qualify using two years of tax returns and business documentation to establish qualifying income. FHA underwriting for self-employed applicants follows the same core credit and DTI standards as W-2 borrowers, just with additional income verification.
How does a mortgage pre approval without hard pull actually work?
It works by using a soft credit inquiry to estimate your credit profile and FHA eligibility without a hard inquiry hitting your score. Duane Buziak’s NoTouch Credit Pull process reviews your file this way so you get real pricing and eligibility feedback before any formal application triggers a hard pull.
Can you refinance an FHA loan later?
Yes, through either an FHA Streamline Refinance, which requires minimal documentation, or a conventional refinance if your equity and credit support it. Refinancing to conventional financing is also the main way to eliminate FHA mortgage insurance once you’ve built sufficient equity.
Deciding If FHA Financing Fits Your Situation
FHA loans trade a lower credit score threshold and smaller down payment for ongoing mortgage insurance costs that, on a typical loan, add tens of thousands of dollars over 30 years compared to insurance-free financing. Whether that trade makes sense depends on how close you are to qualifying conventionally and how much cash you have available today versus what you’re willing to pay monthly for years to come.
If you’re in Virginia, Florida, Tennessee, Georgia, DC, North Carolina, South Carolina, or Maryland, Schedule your free consultation today with Duane Buziak, NMLS #1110647, Coast2Coast Mortgage LLC NMLS #376205, and start with a soft pull mortgage broker pre-approval that won’t touch your credit score. You’ll see real FHA numbers for your file before deciding anything.