Skip to Content

How to Buy a House with an FHA Loan

How to Buy a House with an FHA Loan

Wondering how to buy a house with an FHA loan? It’s easier than you think! With generous qualification guidelines and low down payment options, the FHA has made it easy to buy a house with low income. To make things even easier, we’ve assembled all the information you need into one helpful guide!


What is the FHA?

The Federal Housing Administration is part of the US Department of Housing and Urban Development (HUD). It’s also the only government agency that is entirely self-funded and operates without any expense to taxpayers!

This agency began in 1934, when the housing industry was struggling. Two million construction workers had lost their jobs and only four in 10 American households owned their homes. At the time, mortgages were awful. Buyers could only borrow half of a home’s value and had to repay the entire amount within three to five years. The last payment was a balloon payment that low income families simply couldn’t afford. The FHA helped change that by financing homes for returning veterans and the elderly, disabled and low income populations.

What are FHA Loans?

FHA loans are loans that are insured by the Federal Housing Administration (FHA). They are not issued by FHA or the federal government; they are merely insured by them.

This means that if you stop paying your mortgage for any reason, you’ll still go through the foreclosure process. However, even if you lose the home for nonpayment, the lender will still be paid by the Federal Housing Administration. This allows lenders to provide financing to “higher risk” groups like low income earners because they know they’ll still get their money even if you default (stop paying) on the loan.


FHA provides mortgage insurance on loans throughout the United States and its territories. In fact, the FHA is the largest insurer of mortgages in the world!

Why should I consider a FHA loan?

There are many benefits to using an FHA loan to purchase your home.

Down payments can be as low as 3.5 percent with an FHA loan! You can also use gifts from others or government grants to help pay your down payment and closing costs.

Credit scores can be as low as 500 with an FHA loan! However, if your credit score is less than 580, you will have to pay 10% toward your down payment. In some cases, the FHA will make allowances for applicants with non-traditional credit history or insufficient credit.

Closing costs can also be paid for by the seller! With an FHA loan, the seller can pay up to 6 percent of the home’s price toward the closing costs!

Repair costs can be included in your FHA loan! The FHA offers a special loan product, called a 203(k), which finances the projected value of the home after repairs are completed. This can give you up to $35,000 for nonstructural repairs on your home! In some cases, you can also use these funds to help pay for your rent or other temporary housing while repairs are completed.

AdobeStock 84065217 1 for

Who qualifies for FHA loans?

The FHA makes qualifying easy! The FHA does not specify a minimum required income. To qualify, you need to have a credit score of at least 500 and a reasonable debt-to-income ratio (31/43). The FHA will even approve applicants with a recent Chapter 13 (1 year) or Chapter 7 bankruptcy (2 years)!


The debt-to-income ratio means that your new house payment (including principal, interest, taxes, insurance, homeowners association dues, etc) should not consume more than 31% of your total monthly income. Your mortgage plus all your other monthly expenses (such as student loans, car loans, credit cards, etc) should not exceed 43% of your monthly income.

Remember that FHA loans are issued by lenders across the country and each lender can set its own minimum requirements. Some may choose to set qualifications that exceed the FHA’s minimums. Expect that your job stability, credit history and other factors may be included when your lender decides whether or not you qualify for an FHA loan.

How do I get a FHA loan?

You will need to meet with an FHA-approved lender to begin the application process. You can find one by searching the HUD Lender List! 

Mary Watson

Wednesday 1st of February 2023

I have picked out a local mobile home in a senior community. How do I obtain assistance for up to $30,000 dollars to move in?

Catherine Marucci

Wednesday 8th of February 2023

Hi Mary. You will need to contact a lender. Here is the official list: