FHA Loans: The First-Time Buyer’s Workhorse
The FHA loan, insured by the Federal Housing Administration, exists to put ownership within reach of people conventional financing leaves behind. It is the most forgiving mainstream loan in America, and for good reason.
Why people choose it
- 3.5% down with a credit score of 580 or higher — and a path with 10% down for scores as low as 500.
- Flexible credit. Past bumps that stop a conventional loan often do not stop an FHA loan.
- Gift-friendly. The entire down payment can come from an eligible gift.
- Assumable. A future buyer may be able to take over your FHA loan — a quiet advantage if rates are higher when you sell.
The trade-off: mortgage insurance
FHA loans carry mortgage insurance premiums — an upfront premium (commonly added to the loan) and an annual premium paid monthly. On most FHA loans today, that annual premium stays for the life of the loan. That is the price of the easier approval. For many borrowers it is a bridge: buy now with FHA, build equity and credit, and refinance into a conventional loan later to shed the insurance.
At Lexington we write FHA from a 500 FICO. If another lender told you your score was too low, that was their overlay, not the rule. Ask us before you give up.