FHA Loans

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FHA loans can provide flexible financing for homebuyers, including 3.5% down for qualified borrowers with credit scores of 580 or higher. Fairhope Mortgage also offers FHA financing options for qualified borrowers with credit scores as low as 500 with a minimum 10% down payment.

Whether you're a first-time homebuyer, have less-than-perfect credit, need help with your down payment, or simply want a lower-down-payment mortgage option, an FHA loan may be worth considering.

Minimum Down Payment with 580+ Credit
3.5%

Credit Score 500–579
10% minimum down payment

Credit Score Below 500
Not eligible under FHA's standard minimum credit-score requirements

Maximum Purchase LTV with 580+ Credit
96.5%

Maximum LTV with 500–579 Credit
90%

Occupancy
Primary residence

Seller Contributions
Up to 6%, subject to FHA requirements

Upfront Mortgage Insurance Premium (UFMIP)
Generally 1.75% of the base loan amount

Loan Limits
Vary by county and property type

Eligible Property Types
Eligible 1–4 unit homes, certain condominiums, manufactured homes, and other qualifying properties

One of FHA financing's major advantages is the ability to accommodate a wider range of credit profiles.

Qualified borrowers with a Minimum Decision Credit Score of 580 or higher are eligible under FHA guidelines for maximum financing.

For a purchase, that means up to 96.5% loan-to-value, resulting in a minimum required down payment of 3.5%.

Fairhope Mortgage can also work with qualified FHA borrowers with credit scores as low as 500.

Under FHA guidelines, a borrower with a Minimum Decision Credit Score between 500 and 579 is limited to a maximum 90% LTV, which generally means at least a 10% down payment on a purchase.

HUD states that borrowers with an MDCS below 500 are not eligible for FHA-insured financing. 

Not every lender offers FHA loans down to a 500 credit score. Individual lenders can impose credit-score overlays or additional underwriting requirements beyond FHA's minimum standards.

Fairhope Mortgage has options for qualified FHA borrowers with scores as low as 500.

Approval still depends on the complete loan profile, including credit history, income, debts, assets, property eligibility and applicable underwriting requirements.

For borrowers with scores between 500 and 579, FHA limits financing to 90% LTV, generally resulting in a minimum 10% down payment. 

Important: Your down payment is not necessarily the same as your total cash required to close. Closing costs, prepaid taxes, homeowners insurance, escrow deposits and other transaction expenses may also apply.  FHA does allow seller-paid closing costs of up to 6% of the purchase price, so many buyers do not end up paying any closing costs as long as that is addressed in the contract. 

Down payment can come from:

• your own checking and savings account
• investment accounts
• your 401(k) if you're a first-time homebuyer
• a loan from your 401(k)
• A gift from a qualifying family member 

Yes. Most FHA mortgages have two forms of mortgage insurance.

The current standard FHA Upfront Mortgage Insurance Premium is 1.75% of the base loan amount for most FHA purchase and refinance transactions.

The UFMIP can generally be financed into the mortgage rather than paid entirely in cash at closing. HUD's current mortgage-insurance guidance confirms the 1.75% standard UFMIP. 

FHA also charges an annual mortgage insurance premium that is generally collected through monthly mortgage payments.

For many common FHA purchase transactions with a term greater than 15 years and an LTV above 95%, the annual MIP is currently 0.55%, although the applicable rate depends on factors including loan term, base loan amount and LTV. 

For many FHA loans with an original LTV greater than 90%, annual MIP generally applies for the mortgage term.

At an original LTV of 90% or less, applicable annual MIP generally lasts 11 years, subject to the applicable FHA premium schedule. 

Official FHA mortgage insurance information:
HUD FHA Mortgage Insurance Premium guidance

This is the most common FHA purchase.

FHA financing may be available for units in FHA-approved condominium projects and, in certain circumstances, through FHA's single-unit approval process.

HUD maintains supplemental condominium documentation alongside Handbook 4000.1. 

FHA can finance qualifying owner-occupied 2–4 unit properties. The borrower must meet FHA occupancy requirements, and additional requirements can apply, particularly to 3–4 unit properties.

Eligible manufactured homes may qualify for FHA financing when applicable borrower, property, foundation, title and other program requirements are met.

FHA financing can also be used for eligible newly constructed properties, subject to FHA requirements.

FHA's 203(k) program can allow eligible borrowers to finance both the acquisition/refinance of a property and qualifying rehabilitation expenses.

There isn't one simple DTI number that accurately describes every FHA approval.

Many FHA loans are evaluated through FHA's TOTAL Mortgage Scorecard using an automated underwriting system. FHA describes TOTAL as an algorithm that evaluates borrower credit history and application information; it is accessed through an AUS rather than being an AUS itself. 

Loans requiring manual underwriting are subject to specific FHA ratio requirements and compensating-factor standards.

That means a borrower shouldn't assume they qualify—or don't qualify—based solely on a generic DTI percentage found online.