FHA Loans

The Federal Housing Administration does not lend money directly. An FHA-approved lender makes the mortgage, and FHA insurance protects the lender against certain losses if the borrower defaults. The borrower must still qualify under current FHA and lender standards.

• The home generally must be an eligible one-to-four-unit property used as the borrower’s principal residence.
• An FHA appraisal evaluates value and FHA property requirements; it is not a home inspection.
• FHA loans generally include an upfront mortgage insurance premium and an annual premium collected through monthly payments. When the upfront premium is financed, it increases the loan balance.
• Loan limits vary by county and year, including in California’s higher-cost counties.

See HUD’s official FHA 203(b) overview for current program information.

FHA financing can be useful, but the best program depends on the complete loan scenario.

• Lower down-payment option: Eligible borrowers can qualify for approximately 96.5% financing, commonly described as 3.5% down. Credit, underwriting, property, and lender requirements apply, and some transactions require more.
• Permitted sources of funds: Qualified gift funds and approved assistance can be used when the source, transfer, and program conditions are properly documented.
• Seller or interested-party contributions: Certain closing costs and prepaid items can be paid within current FHA limits. This does not automatically create a no-closing-cost loan.
• Property choices: Eligible one-to-four-unit principal residences can include certain houses, condominiums, and manufactured homes that meet current requirements.

FHA is not automatically less expensive than conventional financing. Compare the interest rate, mortgage insurance, cash needed, monthly payment, and long-term cost for your actual scenario.

There is no universal FHA document checklist. The lender requests what is needed to verify the borrower, funds, property, and loan terms. Common items include:

• Government-issued identification and identifying information required for the application.
• Recent income and employment documentation appropriate to the income type.
• Bank, retirement, or investment statements used to document funds and reserves.
• Housing history and information about other real estate owned.
• Purchase contract, homeowners insurance, and property-related documents.
• Additional business records for self-employed borrowers when required.
• Documentation for gifts, large deposits, support obligations, or other material items when applicable.

Exact requirements vary. Begin with an FHA pre-approval, use our secure document portal, or review the Mortgage FAQ.

Are FHA loans only for first-time home buyers?

No. First-time and repeat buyers can use FHA financing when they and the property meet current requirements.

Does FHA lend the money?

No. A private FHA-approved lender makes the loan, and FHA provides mortgage insurance.

How much is the minimum down payment?

Approximately 3.5% down can be available to borrowers who meet the applicable credit and underwriting requirements. Available financing also depends on the property, appraisal, loan limits, and lender standards.

Will an FHA loan include mortgage insurance?

Generally, FHA forward mortgages include an upfront mortgage insurance premium and an annual premium collected monthly. The amount and duration depend on the loan’s current rules and structure.

Can FHA finance a condominium?

Potentially. The condominium project or individual unit must satisfy the applicable FHA approval and lender requirements.

Can a seller help with closing costs?

Seller and other interested-party contributions are permitted within current FHA limits and must be documented in the transaction. They do not guarantee that every borrower will close without paying costs.

Are FHA loans assumable?

FHA-insured mortgages can be assumable when the new borrower and transaction satisfy the servicer’s and FHA’s requirements. An assumption is not automatic.

FHA qualification is based on the complete borrower and property profile, not one universal credit score or debt ratio. A lender typically evaluates:

• Occupancy: The borrower generally intends to use the property as a principal residence.
• Credit: Credit history and the FHA minimum decision credit score rules apply, and lenders can maintain additional standards.
• Income and debts: Stable, documentable income must support the proposed payment and other obligations under the applicable underwriting findings.
• Funds: The down payment, closing funds, gifts, and material deposits must come from acceptable, documented sources.
• Property: The home must meet appraisal, condition, eligibility, and county loan-limit requirements.
• Major credit events: Bankruptcy, foreclosure, and other events are reviewed under the current FHA rules and facts of the file; fixed waiting-period statements should not be treated as universal approvals or denials.

California loan limits differ by county and can change annually. Strategic Home Loans reviews the applicable limit and underwriting requirements for the specific property and borrower.

What is an FHA Streamline Refinance?

An FHA Streamline Refinance is designed for an existing FHA-insured mortgage. The current loan generally must meet FHA payment-history requirements, and the new loan must provide the required net tangible benefit, such as an eligible payment reduction or movement from an adjustable-rate loan to a fixed-rate loan.

Does “streamline” mean no documentation?

No universal waiver should be assumed. FHA permits streamline transactions with or without an appraisal, but appraisal, credit, income, employment, and other documentation requirements can vary with the transaction, lender, investor, and underwriting method.

Can closing costs be financed?

FHA limits how the new base loan amount is calculated on a streamline refinance. Closing costs can require borrower funds or a lender credit, while the permitted upfront mortgage insurance premium can generally be included in the new loan. A lender credit can affect the interest rate, so compare the full cost rather than relying on “no-cost” language.

Can a borrower receive cash back?

An FHA streamline is not a cash-out refinance. Only limited incidental cash back is permitted under current rules.

Review HUD’s official FHA Streamline guidance, compare payments with our mortgage calculators, or contact Strategic Home Loans for a scenario-specific review.

These materials are not from HUD or FHA and were not approved by HUD or a government agency and in some cases a refinance loan might result in higher finance charges over the life of the loan.