FHA loans are mortgages insured by the Federal Housing Administration. They exist for buyers who don’t fit a perfect underwriting box yet — lower credit, smaller down payment, recovering from a credit event, or buying a 2-4 unit owner-occupied home to live in one unit and rent the rest. We work FHA files to FHA minimums (down to 500 credit with 10% down or 580 with 3.5% down), not the inflated overlays many lenders impose. Lending in 49 states. New York excluded.
No SSN required. No credit pull. Takes about 2 minutes.
What FHA actually is
An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), part of HUD. The FHA doesn’t make the loan — your mortgage lender does — but the FHA insurance lets the lender accept lower credit and smaller down payments than conventional loans require.
It’s not a “subprime” loan. It’s a government-insured loan with a specific set of rules designed to expand homeownership access. The trade-off is mortgage insurance (MIP) — both upfront and monthly — that typically stays for the life of the loan.
Who FHA is for
First-time homebuyers without a large down payment
3.5% down with 580+ credit, gift funds allowed for the entire down payment, and down payment assistance programs widely available. FHA is the most accessible path to first-home ownership for buyers without 5-20% saved.
Borrowers with credit between 500 and 660
Conventional loans don’t qualify below 620 — and even at 620 conventional pricing is steep. FHA is where you go to access homeownership while rebuilding credit. We work files down to 500 credit with 10% down — most lenders won’t.
Borrowers recovering from credit events
2 years from bankruptcy, 3 years from foreclosure or short sale — and the FHA Back-to-Work program may compress that to 12 months if the event was caused by documented hardship.
House hackers buying 2-4 unit owner-occupied properties
FHA allows 1-4 unit properties as long as you live in one unit. Rental income from the other units helps you qualify. The 3.5% down advantage applies to the entire purchase price — including the rental units.
FHA at a glance
Credit and down payment
580+ credit: 3.5% down (96.5% LTV). 500-579 credit: 10% down (90% LTV). Below 500: not eligible.
2026 loan limits
$541,287 for a one-unit property in most counties (the FHA floor). $1,249,125 in high-cost counties (the FHA ceiling). Multi-unit limits scale up: 2-unit $693,050, 3-unit $837,700, 4-unit $1,041,125 baseline.
Mortgage insurance (MIP)
1.75% upfront MIP (typically financed into the loan). 0.55% annual MIP for most 30-year loans with less than 5% down. Annual MIP stays for the life of the loan if less than 10% down; drops after 11 years at 10%+ down.
DTI
43% standard, extending to 50%+ with compensating factors and automated underwriting approval.
Property types
Single-family residences, townhomes, planned-unit developments, 1-4 unit owner-occupied, FHA-approved condos, manufactured homes meeting HUD code.
Seller concessions
Up to 6% of the purchase price toward closing costs and prepaids (generous compared to conventional). Temporary buydowns (2-1, 3-2-1) allowed within the IPC cap.
FHA programs we work
FHA Purchase
The standard FHA-insured purchase loan. 3.5% down with 580+ credit. All eligible property types. The workhorse FHA product.
FHA Streamline Refinance
Simplified refinance from one FHA loan to another. No appraisal needed in most cases. No income verification. Designed to let FHA borrowers grab a better rate fast when markets improve.
FHA Cash-Out Refinance
Pull equity out of an FHA-insured property. Up to 80% LTV. Full underwriting required (unlike Streamline). Useful for debt consolidation, home improvements, or other large expenses.
FHA 203(k) Renovation Loan
Finances purchase (or refinance) plus renovation in a single mortgage. Two versions: Standard 203(k) for projects over $35,000 or with structural work, Limited 203(k) for smaller projects without structural changes. Loan amount based on after-improved value.
FHA Back-to-Work
Compressed waiting periods after bankruptcy, foreclosure, or short sale — as short as 12 months — when the event was caused by documented economic hardship (job loss with 20%+ income drop, medical event). Requires HUD-approved housing counseling.
FHA 2-4 Unit Owner-Occupied
Live in one unit, rent the others. 3.5% down on the entire property. Rental income from the other units helps you qualify. The lowest-friction path into small multifamily real estate for someone just starting out.
Where FHA fits vs other loans
FHA vs Conventional
FHA wins on credit access (500-680 range) and seller concession allowance (6% vs 3% at high LTV). Conventional wins long-term — removable PMI vs FHA’s lifetime MIP. Common path: start with FHA, refinance to conventional once you have 20% equity to drop the MIP.
FHA vs VA (for veterans)
For veterans with full VA entitlement, VA almost always wins — 0% down, no monthly mortgage insurance, often lower rates. FHA only beats VA for a veteran with no remaining entitlement who’d owe a full down payment on VA anyway.
FHA vs USDA
USDA is 0% down but limited by geographic eligibility (USDA-designated areas only) and household income (115% of area median income). FHA has no income cap and is available everywhere. If you qualify for USDA, USDA usually wins; if not, FHA is the next path.
What working with us looks like
We’re a no-overlay FHA shop. That means we work files down to FHA’s actual minimums — 500 credit with 10% down or 580 credit with 3.5% down — instead of imposing the 620, 640, or 660 floors most lenders use. We also manually underwrite FHA files that automated underwriting kicks back, when there’s a clear story the file can support.
The application starts with a 2-minute intake — no SSN, no hard credit pull. After we talk through your scenario, we tell you exactly what’s possible and what it looks like, then move into formal pre-approval if FHA is the right path.
What “No Overlays” Means
An overlay is a credit rule a lender adds on top of VA’s. We don’t add them — we underwrite to VA guidelines. Separate from underwriting, every VA loan must also be eligible for sale or securitization, and Ginnie Mae sets pooling requirements that apply to all lenders and that no lender can waive. Refinances in particular carry seasoning requirements under Ginnie Mae that are broader than VA’s. We’ll tell you upfront if one applies to you.
Common questions
Quick answers to the most common FHA questions are below. For the full set — credit recovery timelines, MIP mechanics, gift fund rules, property requirements, 2-4 unit specifics, refinance options, the application process step by step — visit the FHA Loans FAQ.
What credit score do I need?
580+ for 3.5% down. 500-579 for 10% down. Below 500: not eligible.
Can I use a gift for the down payment?
Yes — the entire down payment can come from a documented gift (family, employer, charity, government assistance). Gift letter and source documentation required.
Does FHA MIP ever go away?
Generally not on post-2013 FHA loans with less than 10% down — it stays for the life of the loan. The path to drop it is refinancing into a conventional loan once you have 20% equity.
Can I get an FHA loan after bankruptcy?
Yes. 2 years from Chapter 7 discharge. 12 months of on-time Chapter 13 plan payments (with trustee approval) or 2 years from discharge. Back-to-Work program may compress to 12 months.
About this page: Written by J.D. Peck, NMLS #314883, Area Manager and Mortgage Loan Originator at Paramount Residential Mortgage Group (PRMG), NMLS #75243. 25+ years of mortgage lending experience, 3,100+ loans closed, Scotsman Guide Top Originator 2026. FHA specialties: manual underwriting for non-traditional credit, 500-580 credit recovery, 2-4 unit owner-occupied purchases, FHA 203(k) renovation, and self-employed FHA borrowers. Built from current HUD FHA guidelines (4000.1 handbook) and 2026 FHA loan limits. Lending in 49 states. New York excluded. Last updated September 1, 2026.
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No SSN required. No credit pull. Takes about 2 minutes.
Need Help With the Down Payment?
Colorado runs several programs that can cover your entire FHA down payment, and two national programs have no income limit at all. See every Colorado down payment assistance program compared.