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FHA Loans

FHA Loans Basics

The Federal Housing Administration, or FHA, helps make buying real estate easier and more affordable for many Americans. Considering an FHA loan? Here's what you need to know.


[Updated: May 27, 2021 ] Nov 04, 2019 by Aly J. Yale

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Features Limited 203k Standard 203k
Loan limits $35,000 Up to the FHA limits for your county
Property condition Must be habitable during renovations Does not need to be habitable during renovations
Eligible renovations Minor repairs and renovations Major repairs, rehabilitation, and construction
Payments 50% up front, 50% after project has concluded Payments handled by a HUD consultant
Other differences No third-party inspection required More paperwork, requires a HUD consultant

Data source: U.S. Department of Housing and Urban Development.

Property Size FHA Loan Limit
Single-family $314,827 ($726,525 in high-cost areas)
Two-unit $403,125 ($930,300 in high-cost areas)
Three-unit $487,250 ($1,124,475 in high-cost areas)
Four-unit $605,525 ($1,397,400 in high-cost areas)

Data source: U.S. Department of Housing and Urban Development.

Charge Average Cost
Down payment Minimum 3.5% of the loan
Closing costs 2% to 5% of the purchase price
Mortgage insurance 1.75% of the loan up-front and 0.45% to 1.05% annually depending on your loan size and term

Data source: U.S. Department of Housing and Urban Development.

Loan Amount Down Payment Annual MIP
$625,000 or lower 5% or less 0.85%
Over 5% 0.80%
Over $625,000 5% or more 1%
Less than 5% 1.05%

Data source: U.S. Department of Housing and Urban Development.
MIP is mortgage insurance premium.

Note: This is a major difference between FHA and conventional mortgages. On conventional loans, you can cancel your private mortgage insurance after your loan-to-value ratio falls to 80% or lower.

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