FHA Loans: Buy a Home with3.5% DownEven with imperfect credit
FHA loans help thousands of Arizona families buy homes every year. Designed for first-time buyers—but anyone can qualify.
I Want to Buy a Home
Use FHA's low down payment and flexible credit requirements to purchase your first home—or your next one.
📍 Select your state to start:
I Want to Refinance
Lower your rate, get cash out, or switch from FHA to conventional to eliminate mortgage insurance.
📍 Select your state to start:
Understand FHA Loans in Minutes
Learn from official government sources—not lender advertisements.
Is an FHA Loan Right for You?
Official HUD video explaining FHA loan basics for National Homeownership Month.
Video Playlist
Credit Flexibility
FHA accepts credit scores as low as 580 for 3.5% down—or 500 with 10% down. More forgiving than conventional loans.
Lower Barrier to Entry
3.5% down on a $300K home = $10,500. Conventional at 5% = $15,000. Gift funds allowed for entire down payment.
Government Protection
FHA insures the loan—lenders take less risk, so they can offer better terms to buyers with less-than-perfect credit.
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, a government agency under the Department of Housing and Urban Development (HUD). The FHA doesn't lend money directly—it insures loans made by approved private lenders.
This insurance protects lenders against losses if you default. Because of this protection, lenders can offer FHA loans with lower down payments and more flexible credit requirements than conventional mortgages.
3.5% Down Payment
One of the lowest down payments available. On a $300,000 home, that's just $10,500—compared to $60,000 for a conventional 20% down payment.
Flexible Credit
Credit score as low as 580 for 3.5% down (or 500 with 10% down). Conventional loans typically require 620+. Recent bankruptcy or foreclosure? Waiting periods are shorter.
Mortgage Insurance (MIP)
FHA requires mortgage insurance: 1.75% upfront (can be rolled into loan) + 0.55% annually. This is the trade-off for lower barriers to entry.
FHA Loan Quick Facts
FHA vs. Conventional Loans
Side-by-side comparison to help you decide which loan type fits your situation.
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Down Payment | 3.5% | 3% - 20% |
| Minimum Credit Score | 580 (500 with 10% down) | 620+ |
| Mortgage Insurance | 1.75% upfront + 0.55%/year For life of loan (if <10% down) | PMI if <20% down Removable at 20% equity |
| Debt-to-Income Ratio | Up to 43% (50% with compensating factors) | Up to 43-50% |
| Loan Limits (2026) | $541,287 - $1,249,125 | $832,750 (conforming) |
| Property Types | 1-4 unit primary residence | Primary, second home, investment |
| Property Appraisal | Stricter standards Must meet FHA minimums | Standard appraisal |
| Gift Funds Allowed | 100% of down payment | Limited sources |
| Seller Concessions | Up to 6% | 3% - 9% (varies by down payment) |
| Best For | Lower credit, limited savings, first-time buyers | Good credit, 10%+ down, investment properties |
Our Honest Recommendation
Choose FHA if: You have a credit score under 680, less than 5% saved, or recovering from bankruptcy/foreclosure. The mortgage insurance cost is worth the lower barriers to entry.
Choose Conventional if: You have 10%+ down and a 700+ credit score. You'll avoid lifetime MIP and save money long-term. Many FHA borrowers refinance to conventional once they build equity.
How to Get an FHA Loan
From pre-approval to closing—here's what to expect at each step.
Check Your Credit
Review your credit report. 580+ for 3.5% down, 500-579 for 10% down.
Get Pre-Approved
Submit documents: pay stubs, W-2s, bank statements, tax returns.
Find Your Home
Shop with pre-approval letter. Make offer within FHA loan limits.
FHA Appraisal
Property must meet FHA minimum standards for safety and soundness.
Close & Move In
Sign final documents, pay closing costs, get your keys!
Key Requirements Explained
FHA Refinance Options
Lower your rate, access cash, or escape FHA insurance entirely.
FHA Streamline Refinance
The fastest way to lower your rate on an existing FHA loan. Minimal paperwork, often no appraisal required.
Best for: FHA borrowers who want to lower their rate quickly with minimal hassle.
FHA Cash-Out Refinance
Convert your home equity into cash. Requires a new appraisal and full underwriting.
Best for: Homeowners needing cash for renovations, debt consolidation, or major expenses.
FHA Simple Refinance
Full documentation refinance. Useful when you don't qualify for Streamline or need to add/remove a borrower.
Best for: Borrowers who need flexibility or are refinancing from a conventional to FHA loan.
Refinance to Conventional
Eliminate FHA mortgage insurance by refinancing to a conventional loan once you have 20% equity.
Best for: FHA borrowers who've built equity and want to eliminate lifetime mortgage insurance.
Not sure which refinance option is right for you?
When FHA Loans Make Sense
FHA isn't for everyone. Here's who benefits most—and honest warnings for each situation.
First-Time Homebuyers
Limited savings? FHA's 3.5% down payment lets you buy sooner. Gift funds can cover the entire amount.
Warning: MIP adds $100-200+/month. Factor this into your budget.
Credit Score Under 680
Conventional loans penalize lower scores with higher rates. FHA offers competitive rates even at 580.
Warning: Work on your credit anyway—you'll want to refi to conventional later.
Recovering from Bankruptcy
FHA has shorter waiting periods than conventional: 2 years after Chapter 7, 3 years after foreclosure.
Warning: Must show re-established credit and stable income since the event.
Higher Debt-to-Income Ratio
FHA allows up to 50% DTI with compensating factors like cash reserves or residual income.
Warning: Just because you can doesn't mean you should. Leave room for emergencies.
House Hacking (2-4 Units)
Buy a duplex, triplex, or fourplex with just 3.5% down. Live in one unit, rent the others.
Warning: Must live in one unit as primary residence. Being a landlord is work.
Using Gift Money
Family helping with down payment? FHA allows 100% gift funds—no personal savings required.
Warning: Gifts must be documented with a letter. No loans disguised as gifts.
Risks & Considerations
FHA loans have real downsides. We'd rather you know now than regret later.
"Will I pay MIP forever?"
Reality: If you put less than 10% down, yes—FHA mortgage insurance lasts the life of the loan. Unlike conventional PMI, it doesn't drop off at 20% equity.
The math: On a $300K loan, MIP costs ~$138/month. Over 30 years, that's nearly $50,000. Plan to refinance to conventional once you hit 20% equity.
"Will the home pass FHA inspection?"
Reality: FHA appraisals are stricter. Peeling paint, broken windows, or safety issues can kill deals. Sellers sometimes reject FHA offers entirely.
Pro tip: In competitive markets, some sellers won't even consider FHA offers. Have a backup plan or offer above asking to compensate.
"What if I need more than the limit?"
Reality: FHA loan limits vary by county. In 2026, the floor is $541,287 and ceiling is $1,249,125. If you need more, you'll need a jumbo or conventional loan.
Check your area: Use the HUD loan limits lookup tool to see your county's specific limits.
"Can I rent it out later?"
Reality: FHA is for primary residences only. You must live there for at least 12 months before converting to a rental. No vacation homes or investment properties.
Exception: You can buy a 2-4 unit property, live in one unit, and rent the others—this is "house hacking" and FHA allows it.
Is FHA Right for You?
Honest self-assessment checklist
FHA May Be Right If You...
- Have a credit score between 580-679
- Can only afford 3.5-5% down payment
- Are 2+ years past bankruptcy or 3+ years past foreclosure
- Plan to refinance once you build 20% equity
- Are using gift funds for down payment
- Want to buy a 2-4 unit property to house hack
FHA May NOT Be Right If You...
- Have a credit score of 700+ and 10%+ down
- Want to avoid lifetime mortgage insurance
- Are buying a vacation home or investment property
- Need more than the FHA loan limit in your area
- Are buying a fixer-upper that won't pass FHA appraisal
- Plan to move or rent it out within 12 months
Our Honest Position
FHA loans are a powerful tool for the right borrower—but they're not always the best choice. If you have good credit and decent savings, a conventional loan often costs less over time. We'd rather steer you to the right product than push FHA just because it's easier to qualify. Let's compare both options before you decide.
Consumer Protections
Federal law protects you throughout the FHA loan process.
Loan Estimate Required
Within 3 business days of applying, lenders must provide a Loan Estimate showing your estimated interest rate, monthly payment, and closing costs.
CFPB Loan Estimate Guide3-Day Review Period
You must receive your Closing Disclosure at least 3 business days before closing. This gives you time to review final terms and ask questions.
CFPB Closing Disclosure GuideNo Prepayment Penalties
FHA loans never have prepayment penalties. You can pay extra toward principal or refinance at any time without fees.
HUD FHA InformationFHA Loan FAQs
Answers to the most common questions about FHA mortgages.
Credit & Qualification
Costs & Mortgage Insurance
FHA vs. Other Loans
Property & Appraisal
Refinancing
Still have questions?
FHA Loans in Your State
Get state-specific FHA information, loan limits, and down payment assistance programs.
Ready to Explore FHA?
We'll help you understand if FHA is right for your situation—and show you all your options.
No pressure, no obligation. If another loan type is better for you, we'll tell you.
Official Resources