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An FHA loan is a mortgage backed by the Federal Housing Administration but issued by an FHA-approved lender. Because the FHA is part of the Department of Housing and Urban Development, these are sometimes referred to as “HUD Loans.” They are primarily designed to make it easier for low-income borrowers to purchase a home. While commonly called “FHA Loans” or “HUD Financing,” neither the FHA nor HUD actually loans the money – they merely approve the lenders and manage the requirements of the program.

With an FHA mortgage, the requirements for the initial down payment are generally lower and lenders have the security of government “insurance” should the borrower default. The cost of this insurance is born partly by the purchaser in the form of mortgage insurance payments to the FHA. The reduced risk to lenders helps to keep interest rates manageable as well, although they will still vary based on the borrower’s credit score and credit history.

Currently, potential homeowners must have a credit score of at least 500 to qualify, as compared to more conventional mortgages which generally look for a score of 620 or above. Scores between 500 – 579 generally mandate a 10% down payments, while those above 580 can do as little as 3.5%. (Conventional mortgages sometimes require down payments as high as 20% of the value of the home.)

Some states or private organizations offer down-payment assistance for qualifying borrowers unable to meet these requirements. Closing costs are kept low as well, generally around 3% of the loan total.

Keep in mind these figures are averages and may vary based on your lender, location, and circumstances. Even those regulated by the FHA may change over time.

Although FHA loans are designed largely to assist low-income borrowers, lenders will check your credit score and full credit history. You will be asked to provide proof of employment and verification of your income over the past two years. A previous bankruptcy or foreclosure doesn’t automatically disqualify you, although you will need to show evidence you’re making progress rebuilding a positive credit history for a few years before consideration. If you are currently behind on student loans or federal income taxes, you are ineligible for an FHA-insured loan program.

An FHA loan can only be used for a primary residence – the home in which you live and use as your legal address. The property will be appraised and must meet certain guidelines in order to qualify.

Types of FHA Loans

There are several types of FHA loans. Unless otherwise specified, however, the term most likely refers to the most common variety, the standard FHA-backed loan.

The FHA 203k, often referred to as an FHA Repair Loan or FHA Rehab Loan, facilitates the purchase and renovation of a home in need of substantial work before becoming an appropriate living space. By making major repairs more practical through combined financing, shoppers are able to consider homes it wouldn’t otherwise make sense to purchase. Lenders are able to verify repairs along the way. Combined with the backing of the FHA, this allows them to approve loans they’d otherwise never consider because of the condition and value of the property in question.

The Energy Efficient Mortgage is similar to the FHA 203k. As the name suggests, it’s used to purchase energy efficient homes, or to upgrade older homes to be energy efficient. The costs of renovation are rolled into the loan and can cover anything from upgraded insulation to energy efficient windows to complete solar or wind systems. All renovations must be approved by the lender, however, and performed to agreed-upon standards in order to qualify. Ideally, such improvements lead to lower utility costs and greater efficiency, which in turn reduce your monthly expenses and add up significantly over time.

The Home Equity Conversion Mortgage (HEMC) is better known as a “reverse mortgage.” Homeowners 62 years old or above may take out loans against the value of their homes, often in the form of monthly tax-free disbursements. When the borrower moves or passes away, the loan must be repaid in full. Generally, this involves selling the home to cover the cost. This allows seniors a reliable “income” while remaining in their homes as long as reasonably possible.

The Section 245a Loan, or Growing Equity Mortgage, targets first-time home buyers – often young couples – who can’t afford a typical house payment, but who expect their income to grow during the life of the loan. The 245a requires a low down payment and has low initial monthly payments which gradually increase over time. The additional payment amounts go towards the principal of the loan to help borrowers pay off their mortgage more quickly.

Things To Consider

A lower down payment means a higher amount financed, resulting in more money paid over the life of the loan. FHA insurance protects lenders, but in no way relives borrowers of their responsibility for making their monthly mortgage payments. Know your budget before committing and make sure you can reasonably and consistently handle the expense. Most FHA-approved lenders limit loan amounts so that no more than 31% of your monthly income is devoted to repayment.

There are additional expenses associated with an FHA Loan as well. Some are typical of any home purchase. Appraisal costs, for example, cover the professional assessment of the value of the home in question. Origination fees help offset the cost of processing your loan application and related paperwork. Any legal fees or other expenses are your responsibility as well, although in some cases sellers may agree to help cover such costs as part of negotiating the sale of the home.

FHA-backed loans require two different kinds of mortgage insurance premiums as well. These are deposited into an escrow account and used to make your required mortgage payments if you default. The first is the “upfront premium” which is generally 1.75% of the total loan and paid at the time of closing. It can sometimes be rolled into the loan rather than paid in full up front. The other is the “annual premium,” which despite its name is typically paid monthly throughout the life of the loan. These typically run from just under .5% to just over 1% of the base loan amount, with an average of around .85%.

Loanry® is here to help you get your FHA Loans


Why Loanry?

Buying or refinancing a home can become intimidating, confusing, or even exhausting. It’s never simple, nor is it intended to be. Any form of home financing is a major commitment for a long period of time, and for many of us, our homes are the most expensive things we’ll ever own – our largest investments and our greatest debt.

That doesn’t mean, however, that we can’t make the process less daunting or simplify your preparation for securing a home loan, whether you pursue an FHA-backed loan or something more traditional. At Loanry, and across the family, we’re available 24/7 with information about different sorts of loans and mortgages, online tools to compare your options, or convenient forms to connect you to a variety of lenders. Everything we do is available to you wherever you happen to be and whenever you choose.

Perhaps you feel uncomfortable about your credit history, or you don’t know as much about how mortgages work as you think everyone else seems to. There’s never any reason to be embarrassed about taking control of your financial world or asking questions, but it’s sometimes less daunting when it’s so easy to initiate on your own time and from wherever you’re most comfortable. Compare loan options on your laptop over breakfast or read up common terminology associated with your mortgage on your cell phone while waiting at the airport. Seek investment advice while your significant other runs into the store for milk or apply for a better credit card after everyone else is asleep.

This is the 21st century, and whatever its challenges, there’s no reason to make personal or small business finance more complicated than they need to be. Life is hard enough. Let’s make money talk a bit easier.


Buying a home is a huge commitment, no matter what method you use. Even refinancing is a pretty big undertaking. Both come with some risks, but few things are as rewarding as owning your own home – especially on the day you make that final payment and it’s truly 100% yours.

You want to make the best decisions you can when you’re choosing a new (or new-to-you) home. Some we can dismiss immediately, while many others have features we find appealing. None are entirely as perfect as we might have imagined. Somewhere along the way, however, is one that makes more sense than the rest. The trick is knowing when we’ve found it, despite our enthusiasm for X, our concerns about Y, or the challenges of Z.

Choosing the right financing is the same way. Some options can be ruled out immediately, while others require more careful consideration. We may not find something that meets every wish we have, but with a little time, effort, and good fortune, we could very well end up with several options from which to choose – each with its own pros and cons. It’s important not to get “bogged down” in the process. Do your research and weigh your decision, but once you’ve done all you can do, don’t be afraid to move forward. Trust your gut and recognize that whatever you choose, what’s most important is what you do with it.

Your options when buying a home are largely shaped by your credit past. Your official credit score and detailed credit history impact what interest rates or other terms are available to you. Once you’ve secured a loan, however, whether it’s FHA-backed or something more conventional, every payment you make (or don’t) shapes your credit future. It takes time to raise your credit score and build a positive credit history, but it doesn’t always take as long as you think. And it starts right now – the moment you recognize this and begin.

A stronger credit history and better credit score mean more options and lower rates in the future. That means more disposable income and more opportunity. In short, money may not buy happiness, but credit worthiness matters more than we tend to realize when it comes to acquiring and doing the things that make us happy, with and for the people who matter most to us. It’s doable, for you, whatever your current situation. And we can help.


Connecting people just like yourself with reputable online lenders is a key part of what we do at Loanry and something we’re proud of throughout the family. We’re good at it, and we like hearing from people who’ve been successful whatever they’re pursuing as a result. That is, however, only one part of what we do.

Our vision is to provide users with far more than help people find a lender. We’re building a “content mall” of related sites covering just about every aspect of personal or small business finance. You can check your credit scores on, learn about different sorts of savings accounts or investment options on, then calculate what it would cost to refinance your car or home on using different interest rates or lengths of the loan. Learn more about devising an effective household budget, different types of small business loans, or how to best prepare for tax season – whatever you need to know, there’s a good chance it’s covered in plain, simple English and freely accessible from wherever you like, whenever you like. Or, if you prefer, we have over 200 videos on our YouTube channel covering many of the same topics – and more are being added weekly.

The focus of each is different, but the goal of everything in the family is the same – to help you take better control of your financial world by offering a central location for information, comparisons, and connections.


Did You Hear?

"The reason a lot of people do not recognize opportunity is because it usually goes around wearing overalls looking like hard work."

Thomas Edison (American Inventor and Businessman)

Educate Yourself

A Guide to

Understanding FHA Loans

FHA Loans aren’t for every homebuyer, but they’re an excellent alternative for some. The many variations and layered requirements can be a bit daunting, but we can help you unravel the main ideas and make a more informed decision about what makes the most sense for you. Whether you’re looking to buy an older home with a low down payment, secure financing to renovate, upgrade for energy efficiency and increased environmental responsibility, or even help grandma weigh the pros and cons of a reverse mortgage, we’ll break things down into plain, simple English and highlight the key issues involved.

Hopefully we’ll simplify the process and answer many of your questions. Better yet, going forward, you’ll have a much better idea of what to ask. Shall we get started?

Explained in 3 easy steps

How all of
this works?

It all starts with a simple loan request that takes a few minutes to complete.

We provide that information, at your request, to participating members who might be able to able to assist you with your financial needs. Many lenders transfer funds to your checking account as soon as the next business day.


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Funds are deposited directly to your bank account as soon as the next business day.

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Reasons for FHA Loans

There are pros and cons to every loan and an FHA Loan is no different. If you qualify for an FHA Loan, you can save a tremendous amount, but below are some other considerations.

Pros: Low Cost Loans

The low upfront costs of an FHA-backed loan may be ideal for first-time or low-income buyers. If you can qualify for an FHA loan, it substantially expands your options for finding a nice home without requiring excessive cash up front.

Pros: Government-Backed Security

Government backing and regulations restrict interest rates and provide security for both buyer and lender. While some of the requirements may prove tedious, most are designed to protect all parties concerned and allow lenders to offer better terms as a result.

Pros: Home and Community Revival

FHA Repair Loans or Energy Efficiency Mortgages help to revive homes which might otherwise fall into decay. Through renovation or improving energy efficiency, older properties can become desirable homes to the benefit of the seller, the buyer, and the lender, as well as the surrounding community.

Cons: Higher Long-Term Cost

Lower down payments and additional requirements like mortgage insurance can increase the overall price paid for the home. This added cost is generally spread out over the life of the loan, making it far less noticeable, but buyers who are able to afford conventional mortgages or higher down payments should consider them more advantageous.

Cons: Harder to Get

FHA loans are more difficult to obtain than many other forms of home financing. Not all lenders offer them, and many who apply are not approved. Be prepared to provide documentation of your income, employment, and other relevant information, and realize that the process is onerous by design – so be patient.

Cons: Limited Options

While expanding your options in some ways, FHA regulations may restrict them in others. Regulations govern which properties qualify for FHA backing and limit maximum loan amounts. Understand that the program itself was instituted with specific goals in mind beyond simply being helpful to individual homeowners, and that any government program means red tape and occasional frustration.

See FAQs

Find answers to some of the most commonly asked questions here

We are a marketing lead generator and advertising service designed to provide you with quick and convenient access to third-party lenders.


We are a marketing lead generator and advertising service designed to provide you with quick and convenient access to third-party lenders.


We are a marketing lead generator and advertising service designed to provide you with quick and convenient access to third-party lenders.


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