FHA Loans

FHA loans” are mortgages insured by the Federal Housing Administration (FHA), which can be issued by any FHA-approved lender in the United States.

Congress established the FHA in 1934 to help lower income borrowers obtain a mortgage that otherwise would have trouble qualifying. In 1965, the FHA became part of the Department of Housing and Urban Development’s (HUD) Office of Housing.

Before the FHA was established, it was common for homeowners to put down 50% of the value of the property as a down payment on short-term balloon mortgages, which clearly wasn’t practical going forward.

Unlike conventional loans, FHA loans are government-backed, which protects lenders against defaults, making it possible to for them to offer prospective borrowers more competitive interest rates on traditionally more risky loans.

Qualifying for an FHA Loan

Because FHA loans are insured by the government, they have easier credit qualifying guidelines than most lenders, as well as relatively low closing costs and down payment requirements.

What is the minimum down payment on an FHA loan?

With an FHA loan, your down payment can be as low as 3.5% of the purchase price, assuming you have at least a 580 credit score.  And closing costs can be bundled with the loan. In other words, you don’t need much cash to close.

In fact, gift funds can be used for 100% of the borrower’s closing costs and down payment, making them a truly affordable option for an individual with little cash on hand.

You can get an FHA loan with zero down?

Technically no, you still need to provide 3.5% down.  But if the 3.5% is gifted by an acceptable donor, it’s effectively zero down for the borrower.

For a rate and term refinance, you can get a loan-to-value (LTV) as high as 97.75% of the appraised value (plus the upfront mortgage insurance premium.)

However, it’s important to note that while the FHA has relatively lax guidelines for its loans, individual banks and lenders will always set their own FHA underwriting guidelines on top of those, known as lender overlays.

And keep in mind that the FHA doesn’t actually lend money to borrowers, nor does the agency set the interest rates on FHA loans, it simply insures the loans.

What is the max loan amount for an FHA loan?

The max loan amount (national loan limit ceiling) for FHA loans for one-unit properties is $625,500, with the exception of some Hawaiian counties that go as high as $721,050.  Additionally, the loan limits are higher for 2-4 unit properties nationwide.

However, some counties, even large metros, have loan limits at the national floor, which is $271,050.  For example, Phoenix, AZ only allows FHA loans up to $271,050.  And it’s not much higher in Las Vegas ($287,500) either.

There are other counties that have a max loan amount in between the floor and ceiling, such as San Diego, CA, where the max is set at $546,250.  In other words, you really gotta check your county before assuming your loan amount will work with the FHA.

Do you need reserves for an FHA loan?

No, reserves are not required on FHA loans if it’s a 1-2 unit property.  For 3-4 unit properties, you’ll need three months of PITI payments.  And the reserves cannot be gifted nor can they be proceeds from the transaction.

Types of FHA Loans

The FHA has a variety of loan programs geared toward first-time homebuyers, along with reverse mortgages for senior citizens, and has insured more than 34 million mortgages since inception.

FHA loans are available for both purchases and refinances, including cash out refinances. The max LTV for a cash-out FHA loan is 95%, assuming the loan amount is $417,000 or smaller, though most lenders tend to cap out at 85% LTV.

For those with existing FHA loans looking to refinance to another FHA loan, the streamline refinance program is a quick and easy option that provides a ton of flexibility, even for those who lack home equity.

Additionally, FHA loans can be either adjustable-rate mortgages or fixed-rate mortgages. If the interest rate is adjustable, it will be based on the 1-Year Constant Maturity Treasury Index, which is the most widely used mortgage index.

Can I get a second mortgage behind an FHA loan?

It’s possible, though most FHA loans have very high LTV ratios, and most home equity loans limit the CLTV (combined LTV) to around 85%-95%, so you’ll need some equity before taking out a second mortgage such as a HELOC.

A second mortgage may also come into play when getting down payment assistance during a home purchase, whereby the loan is subordinate to the FHA loan.

Can FHA loans be used on 2-4 unit properties?

FHA loans can be used to finance 1-4 unit residential properties, including condominiums, manufactured homes and mobile homes (provided it is on a permanent foundation), along with multifamily properties.

However, FHA loans are generally only reserved for borrowers who intend to occupy their properties.

Can I have more than one FHA loan?

Tip: You may only hold one FHA loan at any given time. The FHA limits the number of FHA loans borrowers may possess to reduce the chances of default.

For example, they don’t want one individual to purchase multiple investment properties all financed by the FHA, as it would put more risk on the agency. But there are certain exceptions that allow borrowers to hold more than one FHA loan.

Can I get an FHA loan on a second home?

A co-borrower with an FHA loan may be able to get another FHA loan if going through a divorce, and a borrower who outgrows their existing home may be able to get another FHA loan on a larger home, and maintain the old FHA loan on what would become their investment property.

It’s also possible to get a second FHA loan if relocating for work, whereby you purchase a second property as a primary residence and keep the old property as well.

But you’ll need to provide supporting evidence in order for it to work.

Do FHA Loans Require Mortgage Insurance?

One downside to FHA loans is that the borrower must pay mortgage insurance both upfront and annually, regardless of the LTV ratio.

This differs from privately insured mortgages, which only require mortgage insurance if the LTV is greater than 80%.

The upfront mortgage insurance premium:

FHA loans have a hefty upfront mortgage insurance premium equal to 1.75% of the loan amount. This is typically bundled into the loan amount and paid off throughout the life of the loan.

For example, if you were to purchase a $100,000 property and put down the minimum 3.5%, you’d be subject to an upfront MIP of $1,688.75, which would be added to the $96,500 base loan amount, creating a total loan amount of $98,188.75.

However, your LTV would still be considered 96.5%, despite the addition of the upfront MIP.

The annual mortgage insurance premium:

But wait, there’s more!  You must also pay an annual mortgage insurance premium (paid monthly) if you take out an FHA loan, which varies based on the attributes of the loan.

Beginning June 3, 2013, if the loan-to-value is less than or equal to 95%, you will have to pay an annual mortgage insurance premium of 1.30% of the loan amount.  For FHA loans with an LTV above 95%, the annual insurance premium is 1.35%. And it’s even higher if the loan amount exceeds $625,500.

For loan terms of 15 years or shorter, the annual mortgage insurance premiums are significantly lower (see charts via this link).

The FHA has increased mortgage insurance premiums several times as a result of higher default rates, and borrowers should not be surprised if premiums rise even more in the near future.

Do FHA Loans Have Prepayment Penalties?

The good news is FHA do NOT have prepayment penalties, meaning you can pay off your FHA loan whenever you feel like it without being assessed a penalty.

Prepayment penalties aren’t very common these days, though they were quite prevalent on conventional loans during the housing boom in the early 2000s.

There is a caveat…

However, there is one thing you should watch out for. Though FHA loans don’t allow for prepayment penalties, you may be required to pay the full month’s interest in which you refinance or pay off your loan because the FHA requires full-month interest payoffs.

In other words, if you refinance your FHA loan on January 10th, you might have to pay interest for the remaining 21 days, even if the loan is technically “paid off.”

It’s kind of a backdoor prepay penalty, and one that will probably be revised (removed) soon for future FHA borrowers.  If you’re a current FHA loan holder, you may want to sell or refinance at the end of the month to avoid this extra interest expense.

Are FHA Loans Assumable?

Another benefit to FHA loans is that they are assumable, meaning someone with an FHA loan can pass it on to you if the interest rate is favorable relative to current market rates.

For example, if someone took out an FHA loan at a rate of 3.5% and rates have since risen to 5%, it could be a great move to assume the seller’s loan.

It’s also another incentive the seller can throw into the mix to make their home more attractive to prospective buyers looking for a deal.

Just note that the individual assuming the FHA loan must qualify under the same underwriting guidelines that apply to new loans.

FHA Credit Score Requirements

Can I get an FHA loan with bad credit?

Borrowers with credit scores of 580 and above are eligible for maximum financing, or just 3.5% down. This is the low-down payment loan program the FHA is famous for.

And a 580 credit score is what I would define as “bad,” so the answer to that question is yes.

What if my credit score is below 580?

If your credit score is between 500 and 579, your FHA loan is limited to 90% loan-to-value (LTV), meaning you must put down at least 10%.

If your credit score is below 500, you are not eligible for an FHA loan.

I can’t find a lender willing to give me an FHA loan with a 500 credit score.

As noted earlier, these are just FHA guidelines – individual banks and mortgage lenders will likely have higher minimum credit score requirements, so don’t be surprised if your 580 FICO score isn’t sufficient (at least one lender goes as low as 550).

Since the mortgage crisis struck, FHA loans have become increasingly popular, essentially replacing subprime lending, largely because of their relatively easy underwriting requirements and government guarantee.

But make sure you compare FHA loans with conventional loans as well. There will be cases when the benefit of one outweighs the other.

FHA loans are not guaranteed to be a better deal than other mortgages, so take the time to shop around. And watch out for unscrupulous FHA-qualified lenders who may attempt to misinform you.

Read more: FHA vs. conventional loans


  1. Leila June 25, 2013 at 9:39 pm -

    I was contemplating an FHA loan until my loan officer and I did the math. The insurance premiums are so expensive now, even if the interest rate is a bit lower.

  2. Dee July 17, 2013 at 6:53 am -

    Agree 100%. I compared rates and fees on FHA loans vs. non-FHA…it’s more than $100 cheaper a month, even though the FHA rate is lower, thanks to the ridiculous premiums they’re now charging. Don’t be fooled by the low advertised rate. The mortgage insurance makes it a bad deal.

  3. Hanna January 22, 2014 at 5:21 pm -

    Can gift funds be used for reserves on an FHA loan?

  4. Colin Robertson January 22, 2014 at 5:32 pm -

    No, they can’t be used for reserves, but they can be used for the down payment and closing costs. Keep in mind that you might not even need reserves for an FHA loan, so it’s not necessarily an issue.

  5. Shayna January 23, 2014 at 11:11 am -

    Hi, do FHA loans require escrow accounts? My lender says they do.

  6. Colin Robertson January 23, 2014 at 3:31 pm -

    Yes, the FHA requires lenders to establish escrow accounts for their borrowers to ensure funds are available for things like taxes and insurance.

  7. John B. February 3, 2014 at 6:48 pm -

    I have been trying to get a FHA loan for a new home so we are adopting our Grand Daughter and need to have a better home to bring her to, anyway we are told that we need a Higher Credit Score more than a 617 or 620 I have found out through this site all you need is a 500 score to get a FHA loan, so why was I told my score was Not good enough, I know people who had gotten FHA loans with lower scores than mine.

  8. Colin Robertson February 4, 2014 at 2:19 pm -


    Most lenders require a higher FICO score for an FHA loan, typically 620+ or 640+, though the FHA guidelines do allow for much lower scores. However, most lenders aren’t willing to underwrite loans with credit scores that low because of the high risk of default. You might want to do more shopping around to find a lender willing to go that low, or work on your credit score a little more to get it above those thresholds. I’m pretty sure there are some lenders willing to go as low as 580. Good luck!

  9. Marcelo February 6, 2014 at 2:04 pm -

    Thank you for the informative rundown, but there’s one thing I’m not clear on. Why do FHA loans have lower interest rates? Is it because they’re guaranteed by the government?

  10. Colin Robertson February 6, 2014 at 4:37 pm -

    Yeah, basically because the federal government insures FHA loans, lenders are able to offer lower rates relative to non-gov loans because of the explicit guarantee.

  11. Gary February 17, 2014 at 6:16 am -

    Good info! I know a lot more about FHA loans now thanks to you.

  12. Abbey March 4, 2014 at 6:25 pm -

    why do fha loans require mortgage insurance even if the LTV is below 80%?

  13. Colin Robertson March 4, 2014 at 7:45 pm -

    Good question Abbey…most FHA loans tend to be above 80% LTV and therefore have mortgage insurance, just as a conventional loan would.

    However, the FHA now requires ALL loans to have both upfront MI and annual MI premiums for a certain period of time, regardless of LTV or loan term. This is a recent change implemented to shore up the FHA’s finances, seeing that they needed a bailout of sorts recently.

    It’s not really fair for low-LTV borrowers, which is why you may want to consider non-FHA options as well if your LTV is below 80%.

  14. Steve May 30, 2014 at 7:42 am -

    I see that I need to pay the last month’s interest regardless of when I close, but I am also being told I need to pay MPI for another month out of my escrow after everything has closed. IE, loan paid off on May 15th and they are taking MPI on June 1st??

  15. Colin Robertson May 30, 2014 at 3:31 pm -


    Are you saying they’re making you pay your monthly mortgage insurance premium for the month of May on June 1st as well? Ask the lender for clarification and let me know.

  16. Ralph June 30, 2014 at 3:35 pm -

    do to 10 collections on credit my score is 502. My banker told me not to try and pay it would make it worse (the truth)
    I am trying to straighten out credit removing old credit. it is hard. Kansas is a stickler for medical bills. Can you offer names of some mortgages company’s that may have mortgage loans to offer me ? I can pay a mortgage as I pay high rent now. Can you help. They say FFA helps but low score – it seems that isn’t accurate……

  17. Colin Robertson June 30, 2014 at 4:40 pm -


    The minimum credit score for an FHA loan is 500, and even then lenders have higher requirements. The lowest score I can think of offhand is 550. The collections may also pose a problem even with a higher credit score. And even then you’re probably better off getting your credit score a lot higher before applying for a mortgage to ensure you get a lower interest rate and avoid any hiccups. A broker might be able to do a search for you to see if there’s hope given your credit situation. Otherwise it might need to be resolved a bit before moving forward.

  18. Kerrie July 5, 2014 at 8:10 am -

    Are you required to make a mortgage payment in the same month you are closing on a FHA loan? They called for a payoff amount already and we should be closing before the 15 th of the month.

  19. Colin Robertson July 7, 2014 at 9:43 am -


    If you’re refinancing an FHA loan, you’ll be charged interest for the full month regardless of when you close. Most lenders try to close FHA refis near the end of the month for this reason.

  20. Martha J. Jimenez July 25, 2014 at 12:41 pm -

    I have a first and second mortgage on my primary residence in PA. I would like to purchase a condo in NC prior to listing my home in PA, and wish to continue employment with my current employer (in NYC) for another year or longer. I will not be renting out either place and would like to settle into a new place gradually. I have conventional mortgages on my home but am interested in an FHA loan on a NC condo. Is this possible?

  21. Colin Robertson July 25, 2014 at 1:34 pm -


    The FHA allows loans on primary residences, so if the condo will be your primary residence, it would technically be allowable. However, you’ll need to qualify for both payments and convince the underwriter that you’re actually going to live in the condo as your primary and make your existing property your second home. In that sense, it could get tricky, especially if you’re unable to qualify for both payments at once. You might want to speak to a few brokers to determine the potential hurdles beforehand.

  22. AssumeFHAloan August 3, 2014 at 12:19 am -

    Thank you, Colin, for all the great info.

    I am hoping you can help me with a few questions:

    We are considering buying a home from someone with an FHA mortgage. He acquired it from the owners before him. I assume the FHA loan can continue to be assumed during the loan and property’s lifetime?

    I read that to get a Streamline Refinance that the home has to have been lived in for 12 months or more, with payments made on time, for the mortgages “endorsed” before 2009. If a loan is assumed, when is the endorsement? At the start of the loan on property, or when new buyers buy the home and assume the mortgage?

    Also, is it possible that the seller in their short time at the home,18 months, took advantage of a Cash-Out refinance after 12 months? I wonder if so because without any real appreciation in value, little maintenance, and zero updates on the home, he is asking for 30k more.

    Thanks for any help you can provide.

  23. Colin Robertson August 4, 2014 at 9:57 am -

    You might want to speak with an FHA lender to iron out all those details, but if you’re interested in buying the house simply to get the assumable loan and then quickly refinance it, does that even make sense? Also, sellers can get value from that assumable loan when setting a list price, so that, coupled with the fact that home prices are back near all-time highs may explain why they’re asking so much. You might question the value of assuming the FHA loan.

  24. John Bluemke August 5, 2014 at 10:51 am -


    I am refinancing out of a HUD loan to a conventional loan. Wells fargo is only allowing for refinancing/payoffs on the 1st of the month – meaning they are charging me for the full month of interest – Is this legally permissible?


  25. Colin Robertson August 5, 2014 at 4:16 pm -


    Not sure it’s a legal issue, but the FHA’s practice of collecting a full month is unsavory at best. Your broker/loan officer should be able to figure out a way to minimize the interest expense, otherwise you might want to shop around.

  26. AssumeFHAloan August 5, 2014 at 6:19 pm -

    We are not looking to refinance. I was wondering if it is possible if the previous owner did. He seems a bit sketchy.

  27. Colin Robertson August 5, 2014 at 10:28 pm -

    It’s possible, could have your real estate agent do some digging for you. But like I said before, prices might be inflated right now, even with an assumable mortgage.

  28. John Bluemke August 6, 2014 at 6:04 am -

    Colin – So I think i have figured this out. When I entered into this loan it was Oct 30 of 2012. I did not make a mortgage payment until Jan 1 2013. Per Wells Fargo, they pay the FHA insurance in arrears – so the payment being collected when the loan is repaid is simply them collecting on money they previously paid out. This makes sense to me now.

  29. Jan Miller August 15, 2014 at 6:54 am -

    I purchased my home with an FHA backed loan 1 year ago. As instructed, I filed for a homestead exemption which I thought was supposed to take effect retroactive for the previous six months taxes. However, my mortgage payment has not reflected any decrease. Does the mortgage lender, Wells Fargo in this case, hold the escrow account or is it held by a third party? I want to know who to contact to find out when I will see a reduction in my monthly payment. Thank you!

  30. Colin Robertson August 15, 2014 at 10:00 am -


    Your point of contact is likely your loan servicer, the company that you make monthly payments to. Perhaps giving them a call will help.

  31. JP Sigmon August 19, 2014 at 4:46 am -

    Colin seems you have a lot of knowledge on FHA loans so I am looking fotr some advice. My county in Indiana maximum FHA loan is $271,000 but I am looking to build a new home that is $350,000. I have to use an FHA loan due to some circumstances how can I come up with the other $80,000 without coming all out of my pocket for the difference? Any other loans you can get on top of the FHA?

  32. Colin Robertson August 19, 2014 at 10:53 am -

    Hey JP,

    As I noted in the post already, it kind of defeats the purpose if you have a first mortgage with the FHA because most secondary lenders won’t provide a high enough CLTV to get the job done, but it depends how much you can put down. And if you must go with the FHA for whatever circumstances you have, it might mean that you won’t qualify for the second mortgage, assuming their guidelines are tougher. But you can certainly shop around and see what’s out there, you never know.

  33. Robert Schumann August 25, 2014 at 4:49 am -

    Hi – can an equity loan be obtained on a home that was gifted. My mother recently pasted away, her house was gifted to my sister. I heard that if you obtained an equity
    loan on a gifted house you then had to pay capital gains.

    A local big name bank is offering her a loan, but I don’t want the IRS to send her a huge bill for the capital gains.


  34. Keri August 25, 2014 at 6:47 am -

    Hi Colin,

    My fiance and I are trying to purchase our first home!! We have come across a few homes we likes that are manufactured with land. We heard those homes would require 10% down. Is this correct?

  35. Colin Robertson August 25, 2014 at 3:47 pm -

    Hey Robert,

    That’s a question better suited for your tax preparer or CPA.

  36. Colin Robertson August 26, 2014 at 9:47 am -


    Congrats on your first home! There are maximum loan amounts for FHA loans on manufactured homes that could limit how much you can borrow and it could also be limited based on your credit score as well (you need at least a 580 score for 3.5% down). Be sure you shop around to explore all your options. Lenders that specialize in manufactured home loans may provide higher LTV limits.

  37. Alfredo Reynoso August 29, 2014 at 9:35 pm -

    Hi Colin,

    I have an FHA loan on my current home for about 4 1/2 years. We are looking to relocate and sell our current home. Are we eligible for an FHA loan?

  38. Kevin August 30, 2014 at 2:11 pm -

    Can I get an FHA loan If I had 3 90 day late payments on my now paid off mortgage 12 mths ago?
    My current income and credit is great. My past is haunting me.

  39. Colin Robertson September 2, 2014 at 12:26 pm -


    Assuming you meet all of the FHA guidelines, yes. Your loan approval will likely be conditional on your current FHA loan being paid off when you sell your old house.

  40. Colin Robertson September 2, 2014 at 1:32 pm -


    You might be able to find a lender, though it depends on the other circumstances of the late mortgage payments.

  41. Allison September 11, 2014 at 11:36 am -

    Hi, I was wondering if more than 2 people can be on an FHA loan to qualify for a higher pre-approval amount? Like for instance me and my mother-in-law as the primary and co-borrower….and then add my husband as the co-signer? I’m asking because my husband doesn’t have good credit while me and my mom-in-law have excellent credit. And because the home we are wanting to purchase is over 400k, we don’t make enough unless we add another person. Is this doable in the state of Texas?

  42. Colin Robertson September 11, 2014 at 12:43 pm -


    It wouldn’t really make sense to buy a home with your mother-in-law if you’re married. And your husband’s credit would still be a factor if he co-signed so that doesn’t really solve that issue. The FHA allows really low credit scores so I’m curious how bad his credit is. Speak with some local brokers to see what’s possible in your situation. They might have some solutions for you, including raising his score.

  43. Michelle September 19, 2014 at 9:26 pm -

    I am trying to by a home with an FHA LOAN and was told by my lender that a $5000 reserve is required. I thought FHA did not require reserves on a single family home? Am I being duped?

  44. Colin Robertson September 20, 2014 at 6:38 pm -

    Hmm…did you ask why? Is your credit low, DTI high, is it a multi-unit property, or is there another reason why you need to bring money to the table? Perhaps an individual lender requirement?

  45. Katie September 21, 2014 at 11:11 pm -

    I bought my first home 3 years ago and have a FHA loan. I have a fair amount of equity in my home because it was a short sale and want to refiance the mortgage to pay off the second mortgage that was offered for my down payment. Do you think I could refinance to combine them? I am terrible at these things and looking for advice.

  46. Colin Robertson September 22, 2014 at 8:37 am -


    It’s possible to refinance two loans and replace them with a single loan, assuming you have the necessary equity. Speak with some lenders/brokers to determine what your best path is…you may also want to consider moving from FHA to conventional because FHA loans have gotten a lot more expensive thanks to the new mortgage insurance requirements.

  47. Marie Alston September 23, 2014 at 6:10 am -

    i am looking to buy a home i have two late mortgage payments from earlier this year
    is it possible to still purchase a home?

  48. Colin Robertson September 23, 2014 at 10:21 am -


    It might be possible – speak with some lenders/brokers that specialize in FHA (assuming you want to go with an FHA loan) and explain your situation. If there are extenuating circumstances for the late payments that certainly helps. And any other strong compensating factors will also help your cause.

  49. Dianne September 29, 2014 at 7:13 pm -

    I am wondering why I have to have so many inspections required by the underwriter on my property in order to refinance. I have a manufactured house, and inspections (along with the costs of the inspections) are mounting. The foundation, the lagoon/septic system, the roof. These were not told to me upfront, and have been a condition bit by bit. Is this normal?

  50. Colin Robertson September 29, 2014 at 9:27 pm -


    The FHA has Minimum Property Standards (MPS) that make it much more difficult to get financing with regard to the property itself, so these issues aren’t uncommon. Throw in the fact that it’s a manufactured home and there are even more guidelines that must be met.

  51. Michael October 8, 2014 at 8:46 am -

    Can you use an FHA loan as a construction loan?

  52. Colin Robertson October 8, 2014 at 5:00 pm -


    You might want to see if any FHA lenders offer construction to perm loans, also known as an FHA OTC (One-Time Close) loan.

  53. Casey October 31, 2014 at 4:12 pm -

    Hi Colin,

    How soon can I refinance my loan after purchasing a home? I want to remove my current co-signer on the loan, and add my mother to the loan and\or have her assume the loan altogether. Is this possible or do I have to remain on the loan as well?

  54. Colin Robertson November 1, 2014 at 10:17 am -


    You can generally refinance whenever, though certain lenders may have seasoning requirements such as six months. If you’re doing an FHA streamline refi, you must make six mortgage payments and 210 days must have passed since the closing date of the mortgage being refinanced. Speak to a few lenders to determine the best way of structuring the new loan, it can get tricky.

  55. momof04 November 19, 2014 at 8:20 pm -

    I need help understanding this,
    I’m about to do closing in a week from now but the lender keep asking me for more bank statement I’m tired to be giving so much information they know that I have the money in the bank can they stop asking because I’m about to stop everything and just relax and do it another time can someone help me understand and if this make any sense to anyone?

  56. momof04 November 19, 2014 at 8:21 pm -

    Sorry and is a FHA loan.

  57. Colin Robertson November 20, 2014 at 10:36 am -

    Ask them why they need more bank statements. It’s pretty common to be asked to send over the same documents over and over, or provide additional bank statements. And if you have the money, there shouldn’t be an issue other than your time being wasted. Just breathe…this happens to everyone and it’s certainly not fun to repeat the entire process a second time.

  58. Yvonne November 23, 2014 at 10:54 am -

    How do you begin to find AZ FHA lenders who offer FHA One-Time Close loans for site built homes? Also, if you own your land, is the value of the land considered toward the down payment if one qualifies for such loan?

  59. Colin Robertson November 24, 2014 at 1:25 pm -


    I’d probably just Google FHA OTC lenders in Phoenix to see who’s out there. I believe land equity can be used toward down payment, but discuss with the lenders you get in touch with.

  60. olga November 27, 2014 at 9:54 am -

    Hi there,
    FHA first time buyers, we found a house and paperwork in process now. Our lender asks for bank statements for the pas 2 months which havent been very high between 2-4k will that prevent us from getting approved? Before we can schedule appraisal? We’ve already done inspection on the home and payed down escrow 2k. Thanks.

  61. Colin Robertson November 28, 2014 at 11:58 am -


    It depends what your other loan details are…your loan officer or broker should be able to figure out what you need in order to qualify.

  62. Lori November 29, 2014 at 7:28 pm -


    Do you know if I am allowed to assume an FHA assumable mortgage (if investment property) or do I have to Owner Occupy it? I might have an opportunity for an assumption but I didn’t know if there is a restriction since its for investment purposes…

  63. DaMona December 1, 2014 at 5:16 pm -

    I was wondering, do you think it would be wise for me get out of my FHA loan and get into a conventional loan? I brought my house in 2009 at 5.5% and in April of 2013 then I refinanced it back through my bank Wellsfargo at 4%. To my surprise I didn’t realize that refining my home in 2013 added more time and money that I have to pay for PMI insurance. Now I am required to start all over on my PMI insurance and I will be paying $118 per month extra for this insurance until May 2018. New American Funding offered to take away the PMI and this will lower my mortgage. Should I just stick out these next five years with my current bank or go and get a conventional loan? Thank you

  64. Colin Robertson December 1, 2014 at 5:23 pm -


    Per HUD rules, FHA loans cannot be assumed by investors if the original closing date of the mortgage is after December 14th, 1989.

  65. Colin Robertson December 2, 2014 at 9:57 am -

    If it’ll be cheaper for you to refinance then you might want to refinance. Just consider closing costs. The FHA has become a very expensive option for homeowners and isn’t really advisable anymore unless you have no other choice. But do the math to make sure it actually makes sense.

  66. Shay L. December 4, 2014 at 6:59 pm -

    Hello Colin…my husband and I are trying to find FHA down payment options. We make over $102k / year and have only $1300 / month in monthly debt, but do not have 3.5% saved up for the down payment. He only has a pension and does not have enough to take out the down payment and I only have $2k in my 401k b/c I changed jobs in the last 3 months and emptied out my previous 401k before that to take care of other financial obligations. We do not have anyone that can gift us the down payment. Can we get a bank loan for the down payment and still qualify for and FHA loan if the house value is $215k? We are hoping that we can get the seller to eat the closing cost. The thing is, we have enough money to comfortably satisfy the mortgage and our other monthly obligations, but we just don’t have the down payment and we don’t know how much longer our “dream house” will be on the market.

  67. Colin Robertson December 4, 2014 at 10:08 pm -

    Hey Shay,

    You might be able to get downpayment assistance via your state housing finance agency if you qualify. Look up your state housing authority online to see what it offers.

  68. Shay L. December 5, 2014 at 10:40 am -

    Hi Colin,

    Thanks for the response. I’ve reviewed the guidelines for downpayment assistance and fortunately (but unfortunately in this instance) our income is too high to receive any assistance. Do you know of any other options for first time home buyers or do we have to just wait until we save up the downpayment, being that we can’t get a bank loan b/c it might mess up the approval process? I am also going to ask the broker. Thanks again for your assistance with this.

  69. Colin Robertson December 5, 2014 at 11:30 am -

    Maybe it’s possible to qualify for one of those programs with just one of you on the loan? In any case, a broker should be able to exhaust all possible options for you, that’s exactly what they’re good for. Good luck!

  70. Konrad December 6, 2014 at 11:15 am -

    We refinanced on 11/21/14 and the loan shows as paid off as of 11/28/14 and we were told that the escrow balance would be returned to use within 10 business days. On 12/5/14 a monthly FHA disbursement was paid from the escrow. Is this normal? Are the disbursements in arrears?

  71. Konrad December 6, 2014 at 11:16 am -

    For clarification, we refinanced from an FHA to a conventional mortgage using a different provider.

  72. Stevie December 6, 2014 at 1:53 pm -

    Hi Collin,
    I recently applied for an FHA loan and I was told that I qualify. My credit scores are very wide spread. 578-670-730. I have a foreclosure and repo on my report so the 578 shows that. I make 60k annual. I was wondering if I am approved, will I be able to get a loan for 145k on a single family house? If so, what would the interest be or how can I find that out? Also, many posts here say the mortgage insurance is high. Any idea what range the insurance is ($100 or $200 a month)?

  73. Colin Robertson December 8, 2014 at 12:13 pm -


    You’ll have to speak with some lenders or brokers to see if you qualify based on all your attributes. From there they’ll be able to quote you a rate as well. And yes, FHA mortgage insurance is very expensive, though it’s typically the only option for many borrowers so they might have no other choice. A broker/lender will also be able to explore options for you given your situation. Good luck!

  74. Colin Robertson December 8, 2014 at 1:49 pm -

    Hey Konrad,

    Could be the mortgage insurance for November. Ask your loan officer or the escrow company for clarification.

  75. Victoria December 10, 2014 at 8:01 am -

    We are in the market to buy a new home. We make over $100/year, have $400,000 in 401K, will have $240,000 cash from the sale of our current home which is paid for. We are working with an investor that suggests we put down 10% toward new home, invest the cash and draw monthly dividends to pay the mortgage payment every month. My husband has a low credit score of about 630. Is it better for us to try to get a FHA loan or a conventional loan and will we qualify for FHA loan with our income and assets?

  76. Colin Robertson December 10, 2014 at 10:31 am -


    Are you saying you make $100 a year, or $100k? I’m assuming the latter. Qualification will depend on the the size of the loan and corresponding monthly payment, but your numbers appear to be pretty good. Downside to the FHA is the mortgage insurance premiums, but interest rates tend to be lower than conventional. You’ve got to do the math to determine which is a better deal for you and how much you put down is preference (if you have that luxury), though mortgage insurance can be avoided with 20% down via conventional route. Might also consider improving husband’s credit score if you have time to do so.

  77. Nikki December 12, 2014 at 1:07 pm -

    Can an executor of an existing ‘estate of’ FHA loan assume the mortgage and simultaneously apply for a modification? (loan is already delinquent and thus can’t do the assumption)

  78. Trisha December 15, 2014 at 2:53 pm -


    I just closed on my mortgage. Our payoff included an amount necessary to go to HUD. The payoff was good through Dec 1st. Our pay off was received on Nov 26th. So before the date needed to make the payoff amount valid. My lender then took out another MI payment from my Escrow account on December 4th. Why did they do that? Shouldn’t our payoff had included all that I needed to pay? They said you pay your mortgage insurance in arrears and this payment would be for November. If that is the case then why did they include amounts to go to HUD on the payoff as well?

  79. Colin Robertson December 15, 2014 at 4:08 pm -


    Sounds like it may have to do with the payoff being dated December 1st. You may want to speak with your loan officer and/or title/escrow company for clarification about where each payment was applied and why. They should be able to clear it up for you.

  80. Michael December 16, 2014 at 2:30 pm -

    I recently changed career fields, i was paid a salary for the past 20 years and now I am 100% commission. My wife has had the same job for 18 years and makes $57k pr year.I have made $30k in the 6 months i have been in this new industry. To qualify for the home we want to purchase we need to make $82k per yr. Can we be approved for FHA with my career change 6 months ago? Just a note we have earned over $100k for the last 10 years, not sure if that maters. Thanks for your answer in advance.

  81. Colin Robertson December 16, 2014 at 11:48 pm -


    That might be a tough one. The FHA makes exceptions for borrowers who have recently changed from salary to commission-based jobs while staying with the same employer, but you’ve indicated a different field. The thought process is that they don’t know what you’ll actually make in your new commission-based position, even if your first six months were stellar. You may want to speak with a broker/lender or two to explore all your options.

  82. Bruce December 18, 2014 at 11:35 am -

    Colin, we currently have an FHA loan at 6% on our home that we have up for sale. We do not think the house will sell soon so we are considering an FHA streamline refinance to lower our payments down. Can we refinance while we have the home on the market? After it is off the market do we have to a wait to refinance? If so how long?

  83. Colin Robertson December 18, 2014 at 7:34 pm -


    You may want to speak with some FHA lenders for specific guidelines, but you’ll likely need to take the property off the market and provide a letter of explanation confirming your intent to keep the property as your primary residence before applying for a refinance.

  84. Erin December 30, 2014 at 12:40 pm -

    Hi we are currently selling our home and the buyers are getting a FHA loan. When the appraiser came our home appraised for more than the selling price. The appraiser from the bank, however, is requesting that we reside our garage prior to the sale. I am confused how this works. Why are we responsible for replacing the siding and is there anyway to get around this? The siding was tented in some places due to tree branches hitting it during a storm.


  85. Colin Robertson December 30, 2014 at 12:51 pm -


    The FHA generally has more requirements regarding the condition of the property to allow for FHA loan approval. Discuss with your lender/real estate agent to see what your options are.

  86. Ryan Packard December 30, 2014 at 1:27 pm -


    I’m impressed that you’ve been so present to answer questions on this blog. Nicely done and thank you!

    I have heard of loans being “called” by the lender where they decide they want the borrower to pay off the entire loan or a large portion of it all at once. This has happened historically few times when lending institutions need cash.

    I’d like to know if it’s possible that my lender can require me to pay a large sum of money all at once or “call” this loan. I feel in a way stuck in that I may not get what I would need for the property to make a sale worth it. On the other hand I bring in an extra $200 / month in income from this property but it is so old that I spend that on repairs. It would give me peace of mind to know that the loan cannot be called by the lender in any way, shape or form. How would I find this out? Does the FHA loan allow it or protect against it? Thanks!

    More Background if needed: I have FHA Loan closed in 2009. Duplex. Was primary residence. Moved out in 2011. Now is an income property. Doesn’t quite break even due to annual repair expenses. Usually I’m out about $800 / year. I’m at about 92% LTV (based on original value of the house at time of loan). Current market probably wouldn’t allow me to bring in too much more than the original appraisal amount. (which happens to be $193,000).

  87. Colin Robertson December 31, 2014 at 11:36 am -


    Why are you concerned that the lender would ask for payment in full? Are you planning on defaulting on the loan? Check your loan documents to see when the lender can accelerate the debt. I think it was common to call loans back in the 1980s when interest rates skyrocketed.

  88. Vicki January 1, 2015 at 1:07 pm -

    Hello, I have recently pre-qualified for an FHA loan for 290K, my credit score is 719, income is at 120K/yr. and I am supposed to go to closing at the end of January. The appraisal came in 10k higher than the selling price. I provided last 2 mos. bank statements along with all other docs., I have over 110k in a 401K, and now, my lender is questioning a negative balance on 1 mos. bank statements, as well as 2 overdrafts on the other months statement. Is this going to jeopardize pre-approval on an FHA loan? I thought that qualifications were less stringent for FHA loans?

  89. Heather January 2, 2015 at 12:00 pm -

    Can you explain reserves a little more? We are approved for an fha loan and got the 3.5% down but suddenly lender is springing 2 months reserves on us. Thanks!

  90. Colin Robertson January 3, 2015 at 1:18 pm -


    You might just need to provide a letter of explanation (LOE) to explain why the account was overdrafted. It’s certainly not a good sign when you get hit with an overdraft, but if you can explain it the underwriter should be able to move past it.

  91. Linda January 3, 2015 at 1:58 pm -

    My husband and I were looking to purchase a home with a FHA loan once I graduated nursing school in April. However, due to a new landlord, we may be forced to move. I wanted to wait so my new salary would be reflected on my loan application. I am guaranteed a nursing job at my hospital. Will the lenders take that into consideration?

  92. Ml January 4, 2015 at 7:44 pm -

    I’m looking to buy a house for 325000, but loan limits for fha is 271000. What. Are my options because i have to go with fha.

  93. Colin Robertson January 5, 2015 at 10:47 am -


    You might want to explore your options just to see if you can qualify via conventional financing as well. Higher loan limits and as little as 3% down could be an easier qualifying option with Fannie/Freddie.

  94. Colin Robertson January 5, 2015 at 11:23 am -


    HUD guidelines state that the new job has to be “a guaranteed, non-revocable contract for employment” and that it must begin within 60 days of loan closing. You may want to speak with some FHA lenders and get pre-approved now before intensifying your home search to clear any potential hurdles.

  95. DAMON January 5, 2015 at 11:44 pm -


  96. Colin Robertson January 7, 2015 at 10:41 am -


    Per HUD rules, if the loan was endorsed on or after December 8, 2004, a refund is due only if you refinance to a new FHA-insured loan. If your loan is older, there’s a chance of a refund and you’d need to contact HUD to see if you’re due any money. http://www.hud.gov/offices/hsg/comp/refunds/fhafact.cfm

  97. Colin Robertson January 7, 2015 at 7:53 pm -


    It means you need to prove that you have two months worth of housing payments (principal, interest, taxes, insurance) in your bank account. Lenders ask for reserves to ensure you are a sound borrower with the necessary funds to repay your loan. It’s possible your overall borrowing profile calls for the reserves to strengthen your loan file.

  98. kay sanders January 8, 2015 at 7:15 am -


  99. Colin Robertson January 8, 2015 at 11:17 am -


    Sorry to hear that. You may want to shop around more to get a second or third opinion in hopes of finding a bank willing to lend. However, it would probably be a good idea to get your credit cleared up before applying for a loan. Even if you could qualify for an FHA loan, you won’t want the lates and corresponding lower credit score hurting your chances of approval or raising your interest rate. Perhaps enlisting the help of a credit expert might help to clear up your credit report if your efforts haven’t been fruitful?

  100. Lynn January 9, 2015 at 10:25 pm -

    I refinanced my home in 2012 and had to take mortgage insurance because I didn’t have enough equity in my home. I want to sell and buy a less expensive home. Can I do this even though I have mortgage insurance and have not paid the 5 years? Will I owe anything at closing?

  101. Colin Robertson January 10, 2015 at 11:29 am -


    When you sell a home and the loan is paid off in full the mortgage insurance is eliminated.

  102. shannon March 16, 2015 at 12:11 pm -

    i have a question I wanted to buy house that am now living in and go through fha for loan they told me I couldn’t do loan cause im living here and paying rent with cash have receipts they wouldn’t do loan why??

  103. Colin Robertson March 16, 2015 at 3:09 pm -


    They want to know that you’ve been paying rent on time, and cash payments to an individual, as opposed to a property management company, are hard to prove without cancelled checks, especially if they are made to an interested party. Can you prove monthly withdrawals of the cash to pay rent, and/or can the owner document the monthly deposit of your rent payments? You can ask your loan officer what alternatives you have.

  104. Dd March 17, 2015 at 7:30 pm -

    We have a mortgage on a mobile home through greentree financing, but it is not listed as a mortgage on our credit report which is keeping our score down. My questions is if I have this changed to show as a mortgage on our credit score will that keep us from getting an FHA loan on a new home?

  105. Colin Robertson March 18, 2015 at 10:50 am -


    Probably not best to sneak around the FHA…and it may show up on a different credit report even if the one you’re looking at doesn’t have it listed.

  106. Shannon Buhler March 25, 2015 at 6:59 pm -

    We are looking into buying our first home and trying to decide how much money to put down. We are close to having 10% to put down. We are wondering if it is worth it to put more money down in terms of rates and insurance expenses? Or if it matters? This is an FHA loan we are looking at and the money we have is gifted money.

  107. AA March 25, 2015 at 8:23 pm -

    Hi Colin,

    I own a house insured by FHA in Dallas TX since 2008. I had been paying my mortgage on time until in 2004 I had 4×30 days and 3x60days late payments. I moved to GA in 2011 and rented out my house where as leases a house in GA. this month I move to Houston TX due to Job.since Feb 2015 I am regular on payments. I make 110K+ 20% bonus income per year. My current credit score is 617- 618 – 610. I have 5% down. I read on Hud.gov. website that if you are relocating you can get a second FHA loan, is it true?. Please advise what I need to do in order to get approved for 300K mortgage. I have till end of June to find a place to live. Thanks in advance

  108. Colin Robertson March 26, 2015 at 7:58 am -

    Hey AA,

    It’s possible but you’ll need to provide supporting evidence of the move and obviously qualify for the new loan.

  109. Colin Robertson March 26, 2015 at 8:40 am -

    Hi Shannon,

    A 10% down payment can reduce the requirement for monthly mortgage insurance to 11 years instead of the full loan term. With 20% down you can avoid mortgage insurance altogether if you can qualify via the conventional route.

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